What costs are included in 'COGS' or 'Cost of Goods' for a Lees Famous Recipe franchise, and how are they adjusted?

According to the 2025 FDD, the "COGS" or "Cost of Goods" for a Lee's Famous Recipe franchise includes the franchise-adjusted purchase cost for poultry, spices, paper & packaging supplies, and other food ingredients and products. The FDD states that adjustments have been made to account for the franchisor mark-up charged on products sold to franchised Lee's Famous Recipe locations.

For a prospective franchisee, this means that the cost of goods sold, which is a significant expense in the restaurant business, is presented in a way that reflects the pricing structure specific to the Lee's Famous Recipe franchise system. The adjustment for the franchisor mark-up is important because it provides a more accurate representation of what a franchisee can expect to pay for these essential supplies compared to the raw purchase cost before the franchisor's markup.

Understanding how COGS is calculated and adjusted is crucial for a franchisee to accurately project their potential profitability. By accounting for the franchisor's markup, the financial performance representations in the FDD aim to provide a realistic view of the expenses franchisees will incur. This allows potential franchisees to make informed decisions about their investment and operational strategies. Franchisees should inquire about the specifics of this markup and how it may fluctuate over time.