Owning a restaurant franchise can be an exciting and lucrative business, but the investment costs vary based on a number of factors. Learn more about different types of franchises and their costs now — so you can make the best decision for your future.
A MEASURED APPROACH
Franchising is perfect for individuals who want to enjoy the freedom of being their own boss while benefiting from the training, support, and strong reputation of a nationally recognized brand. In addition to earning a solid annual income, owning a franchise means you can skip the opening legwork entailed in advertising, marketing, product development, and quality control that you would have to manage alone as an independent restaurant owner. The downside is that many franchises can be costly ventures for otherwise qualified entrepreneurs who lack exorbitant startup capital.
Unfortunately for franchise investors, a high price tag is not always synonymous with the highest values. Some of the most expensive investments provide little more than name recognition, while some more reasonably priced ventures offer franchisees more support and a greater sense of community and opportunities for success. As with any investment opportunity, it is important to conduct thorough research and compare not only how much the franchises cost to own, but just what each brand has to offer you in a partnership.
KNOW YOUR OPTIONS
Potential investors need a lot of cash available to help fund the costs of opening a restaurant, which can exceed $1 million for many major franchises in the United States. In addition to startup costs, franchisees have to pay ongoing monthly fees for royalties, advertising, and other services that can add up to more than 10 percent of gross sales. But fear not — the right franchise will offer competitive pricing as well as comprehensive support for the price of your investment.
On the high end, Kentucky Fried Chicken requires you to have a net worth of $1.5 million to $2.5 million and minimum liquid assets of $750,000. The franchise fee to become an owner is $45,000, with estimated startup costs ranging between $1.2 million and $2.5 million, and a 5 percent royalty fee paid to the brand on gross monthly receipts.
On the opposite side of the spectrum, Chick-fil-A holds no minimum net worth requirements, maintains zero startup costs, and charges a meager $10,000 franchise fee. However, Chick-fil-A implements markedly high ongoing royalties, charging a fee equal to 15 percent of sales plus 50 percent of pretax profit remaining. It’s also important to note that Chick-fil-A prohibits most of its franchisees from opening multiple units, which can limit franchisees’ potential profits.
Dunkin Donuts requires you to have at least $250,000 liquidity and a net worth of $500,000 per unit. Also, one single candidate must personally meet the financial qualifications. The total initial investment ranges from $228,621 to $1,692,314, with initial franchise fees ranging from $40,000 to $90,000. In some markets, there are five-unit minimums, making the cost and operational control required to maintain business prohibitive for many would-be investors.
The initial investment for a Subway franchise can range between $150,000 to $328,000 for a traditional location, assuming you lease your equipment from the franchisor. In addition to startup costs, Subway franchisees are required to contribute 13 percent from gross total sales each week to cover the costs of royalties (8.5 percent) and advertising (4.5 percent).
Subway’s low menu prices combined with high royalty and advertising fees make turning a profit difficult for franchisees, particularly for single-unit owners. With over 24,000 locations around the United States, franchisees face the challenge of an over-saturated market where they may end up competing with fellow Subway owners just down the street.
To purchase a Wayback Burgers franchise, you will need a credit score of 700 and $125,000 in liquid capital. If you don’t meet the financial or operational requirements on your own, Wayback welcomes partnerships.
Wayback Burgers is an appealing franchise opportunity for first-time business owners and seasoned entrepreneurs alike. With an initial franchise fee of $35,000 and an estimated initial investment between $350,000–$450,000, Wayback is well within the range for prospective investors who are dissuaded by other fast-casual franchises’ seven-figure price tags or costly ongoing fees.
CONSIDER FRANCHISE FEES
Almost every restaurant franchise requires ongoing fees to be paid regularly by the franchisee on top of initial investment costs. The Financial Disclosure Document (FDD) will lay out the percentage amounts and payment schedules of these fees in detail specific to each franchisor. Two of the most common categories of recurring fees are royalty and marketing fees.
ROYALTY FEES. This fee is commonly expressed as a percentage of the gross revenue accumulated by a franchisee or sometimes is expressed as a fixed, recurring amount (e.g. $500/month) regardless of revenue figures.
MARKETING FEES. Since one of the benefits of investing in a franchise is consistent and ongoing marketing support, most franchisors require the payment of a regular fee paid toward those efforts. As with the royalty fee, it is detailed in Item 6 of the FDD and can occur either as a percentage of sales or a fixed amount.
In addition, some franchisors require that a franchisee purchase certain products or services directly from the franchisor or from specific vendors affiliated with the brand. In this situation, it is important to consider how competitive the pricing may be.
Whether or not the costs of these ongoing fees can be deemed reasonable may be entirely subjective and vary from franchise to franchise. It is important to consider the overall opportunity rather than the details of any specific item cost.
THE RIGHT INVESTMENT
Regardless of whether you are able to afford a seven-figure investment or plan to approach a more modest startup, you want to own a franchise you believe in and that is willing to provide you with all of the tools and support necessary to see you succeed. While you are investing in a franchise brand, you want certainty that the franchisor is equally invested in you.
To figure out whether or not you will be able to make a living from the franchise once you have invested, you will need to estimate potential earnings. Some franchisors provide average earnings information in their FDD, while others may require you to make your own figures by gathering information based on market conditions and through speaking with current franchisees.
WAYBACK BURGERS: A MOST VALUABLE OPPORTUNITY
With an average initial investment between $350,000–450,000, Wayback Burgers is a sound and accessible investment for entrepreneurs looking to join the ever-growing fast-casual franchise industry with one of the most profitable burger concepts in the game.
Currently operating 160+ locations domestically and internationally, Wayback Burgers is proud to offer investors from all backgrounds the opportunity to become a part of our winning brand. Providing world-class training, product innovation, and marketing expertise, Wayback Burgers is excited to provide the support and proven model for success to help franchisees achieve their dreams.
If you would like to learn more about franchising with Wayback Burgers, visit us.