Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Papa Murphy’s Franchise Costs (2015 FDD)

by Franchise Chatter on August 15, 2013

in Franchise Costs, Pizza Franchises

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Papa Murphy's Store Exterior Photo by PRO-TECT TINT LV

This post was updated on April 19, 2015 to reflect information from Papa Murphy’s 2015 FDD (Item 7).

Detailed Estimates of Papa Murphy’s Franchise Costs Based on Item 7 (Estimated Initial Investment) of Papa Murphy’s 2015 Franchise Disclosure Document

1.  Initial Franchise Fee:  $15,000 to $25,000

  • You must pay the franchisor an Initial Franchise Fee of $25,000 when you sign the Franchise Agreement for the purchase of your first Franchised Store. You will pay a reduced Subsequent Franchise Fee of $15,000 for the purchase of additional Franchised Stores provided that each additional Franchised Store is purchased by the same legal entity or principal owner that purchased another Franchised Store.

2.  Lease and Utilities Deposits and Payments:  $2,500 to $6,000

3.  Leasehold Improvements:  $70,000 to $150,000

  • This figure does not include any tenant improvement allowance received from your landlord or any free-standing buildings or exterior renovations.
  • The average cost per square foot for leasehold improvements for the CREATE Store format was $65 per square foot.
  • Payments for the Leasehold Improvements are made to suppliers, not the franchisor. The time and method of payment is determined by the contract between you and the supplier.

4.  Signs:  $5,000 to $10,000

5.  Stamped Architectural Drawings:  $3,650 to $5,450

6.  Opening Package (including Equipment and Supplies), Decor, Cabinets, Point-of-Sale System, and Smallwares:  $113,000 to $162,000

  • You must purchase a grand opening supply package from approved vendors, if the franchisor so specifies. The opening package shall include all equipment and supplies necessary to commence business at the Franchised Store. The time and method of payment is determined by the contract between you and the supplier.
  • You are required to have access to a facsimile machine, telephone, point-of-sale computer system and email access, business-class broadband internet connection (DSL, cable, or wireless), and reliable transportation.
  • These costs reflect the cost of building Papa Murphy’s latest store format called the “CREATE Store.” The numbers are based on the actual costs incurred in building approximately 25 CREATE Stores across various geographies.
  • This store format has optional upgrades available. The low range costs reflect few or no upgrades, as well as the highest condition of the space and the lowest cost geography.
  • When estimating the cost of building your Franchised Store, the number of upgrades, space condition, and geography should be considered.

7.  Inventory:  $5,000 to $7,000

  • Inventory is required as outlined in the Operations Manual. Payments for the Inventory are made to suppliers, not the franchisor. The time and method of payment is determined by the contract between you and the supplier.

8.  Initial Advertising Fees and Expenses – 6 Months:  $30,000

9.  Franchise Premises Rent – 3 Months:  $3,450 to $12,186

  • You are solely responsible to obtain and pay for a location for the franchise (“Franchise Premises”). The cost of purchasing or leasing Franchise Premises varies with its location and size.
  • The average size of Franchise Premises built in 2014 was 1,499 square feet and ranges from 1,140 to 2,170 square feet. The average cost for rent for Franchise Premises opened in 2014, including operating costs, was $31,199 per year and ranges from $16,220 to $57,071 per year. The range for Franchise Premises rent identified in this chart reflects the franchisor’s best estimate of the total rent you will pay for the first three months for your Franchised Store.

10.  Materials and Supplies:  $500 to $2,000

11.  Phase 4 (PMI Enterprise Solution) Training:  $400

  • Training is divided into four required phases which may take up to five and one-half weeks. Phase 4 training is conducted by the franchisor’s PMI Enterprise Solution partner, NCR. The cost of Phase 4 training is $400 per entity for up to two participants. Additional participants may attend at a cost of $400 for up to two participants.

12.  Travel and Living Expenses While Training (Phases 1-4):  $3,880 to $11,860

  • If you are not located near a designated Papa Murphy’s certified training store (“Certified Training Store”) or an NCR certified training site, travel, accommodations, meals, and other expenses may apply to all of the training period. These amounts are estimates and can vary widely.

13.  Employee Training:  $500 to $1,500

14.  Insurance – 3 Months:  $375 to $1,175

15.  Bookkeeping/Payroll Service – 3 Months:  $1,500 to $1,600

  • The franchisor requires you to retain an approved bookkeeping and payroll service for the first year of operation of the Franchised Store.

16.  Additional Funds, Working Capital, and Miscellaneous Expenses – 3 Months:  $10,000 to $20,000

  • You will also have other miscellaneous expenses involved in establishing a business. These expenses vary greatly, and the franchisor has estimated a minimum of $10,000 and up to $20,000.
  • They may include attorney’s fees, license fees, deposits, sales tax bonds (where required), recruiting expenses, employee wages, and supply expenses.
  • You will pay your own legal and other expenses in connection with the review and negotiation of your lease.
  • You must pay all taxes required by local, state, or federal laws related to the services furnished or used in connection with the operation of a Papa Murphy’s Franchised Store.
  • You must obtain all permits, certificates, or licenses necessary for the full and proper conduct of the Franchised Store.
  • The franchisor also recommends that you have direct access to a minimum of $10,000 for working capital during the first three months of operation.
  • This row estimates your initial three-month start-up expenses, less any revenue earned by you. This row does not include any salary or reimbursement of personal expenses paid to you.

17.  Total Estimated Initial Investment:  $264,755 to $446,171

  • These figures represent the franchisor’s estimates based upon actual expenses in 2014 and the franchisor’s experience and the experience of its franchisees.
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