Most Popular Food Franchises and How Much They Cost
Owning a fast-food franchise can be a very lucrative business. It's also nice to be your own boss. In addition to earning a solid annual income, being a franchise owner means you can forgo the start-up costs entailed in advertising and marketing, product development, and ensuring quality control when going solo. The downside is, it can be a costly venture. You must have at least $750,000 in liquid assets to open a McDonald's or Taco Bell restaurant. Your net worth must be at least $1.5 million if you want to open a KFC.
Here's a look at nine food franchises considered to be the most popular, and the costs involved in opening each one.
You will need a minimum of $955,000 in nonborrowed, personal resources to be considered for a McDonald's franchise. Most owner/operators enter the franchise system by purchasing an existing restaurant directly from McDonald’s or a McDonald's owner/operator. A small number of new operators choose to purchase a new facility, but that requires an initial down payment of 40 percent as opposed to 25 percent for an existing restaurant. Intensive training offered by the corporation addresses all aspects of operating a McDonald's restaurant.
While McDonald’s does not offer to finance, McDonald’s owner/operators have access to the company’s established lender relationships with some of the lowest lending rates in the industry. There is also a franchise fee of $45,000 and a service fee of 4 percent of gross sales.
The estimated total investment to open a Subway franchise in the United States is between $116,600 and $263,150. It includes the complete investment in setting up a Subway franchise, and also operating expenses for the first three months. After opening, franchisees pay a royalty fee, which is 8 percent of their overall gross sales. There is also a franchise fee of $15,000.
The franchise fee is reported to be $35,000 but has not yet been verified. Start-up costs vary per location. The initial investment ranges from $310,000 to $615,000, with cash liquidity of $200,000 and net worth of $400,000. Although the people who own the frozen dessert yogurt shops won’t discuss sales, the silver lining declares one store could enjoy $250,000 a month on average based on 1,500 customers a day. Idealistic? Maybe not in New York or California. But what about Little Rock? Plan on the usual royalty structure for this newbie, a 5 percent royalty fee with another 2 percent for marketing.
Wendy’s requires $2 million in liquid assets with $5 million net worth for new multiunit franchisees or franchise groups. There is also a franchise fee of $40,000 per restaurant, a royalty fee of 4 percent, and an advertising fee of 4 percent, but if you want to buy a franchise you will have to wait. Wendy’s is not currently accepting applications for domestic franchises, although it appears international franchises and Canadian franchises are still available.
Franchisees at Domino’s Pizza fall into one of two categories: internal or external. Internal franchisees have already worked within Domino’s as a general manager for at least one year. External franchisees have not previously worked with Domino’s as a general manager, but do bring outside business or other management experience to the table. For the first group, the franchise fee is $0 to $25,000 depending on the social segment (i.e., women, minorities, veterans). For external franchisees, the fee is set at $25,000. Domino's Pizza offers a comprehensive training program covering store operations, marketing, finance, and human resources.
If you have a budget of between $1.3 million to $3 million and a net worth of $1 million with $360,000 in liquid assets, you can be in the Pizza Hut business within a year. There is a franchise fee of $25,000, a service fee of 6 percent of gross sales, and an advertising fee of 2.5 percent to 3 percent of gross sales. One big caveat is that you must commit to building at least three restaurants over three years.
Dunkin Donuts requires you to have at least $250,000 liquidity and 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. In contrast, the start-up fee is a manageable $40,000 to $90,000.
In some markets, there are five-unit minimums, but there are no unit minimums in select markets.
Taco Bell has a goal of developing 2,000 new Mexican restaurant locations by 2023. Taco Bell’s main focus is to recruit new franchisees that can acquire and develop multiple units over time.
The initial investment for a stand-alone restaurant is between $1.2 million and $2.5 million, but these figures do not include the land or lease costs. The initial franchise fee is $40,000, and there is a royalty fee of 4 percent of gross sales and an advertising fee of 4 percent gross sales.
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. You'll need to come up with $45,000 to pay the franchise fee and there's a royalty fee of 5.5 percent of gross sales.