Franchise Costs: Detailed Estimates of Pita Pit Franchise Costs (2016 FDD)

This post was updated on August 15, 2016 to reflect information from Pita Pit’s 2016 FDD (Item 7).

Detailed Estimates of Pita Pit Franchise Costs Based on Item 7 (Estimated Initial Investment) of Pita Pit’s 2016 Franchise Disclosure Document

1.  Initial Franchise Fee:  $20,000 to $25,000

2.  Initial Rent and Security Deposit:  $2,400 to $10,000

• The initial start-up expenses include first month’s rent and a security deposit equal to another month’s rent, both paid in advance.

• The space needed for the Restaurant is estimated to be approximately 1,000 – 1,400 square feet.

3.  Opening Cash:  $500 to $1,000

4.  Leasehold Improvements:  $85,489 to $182,220

• These leasehold improvements typically include items such as floor coverings, interior cosmetics, plumbing, electrical work, millwork, pita counters, mechanical work, general construction, architectural services, city plan fees, etc.

• The costs of the improvements will vary from location to location depending on landlord design criteria, contractor pricing, and the condition of the premises. There is no guarantee that your costs will fall within this range.

• If the lessor makes all necessary leasehold improvements, it is possible that such costs will be included in or added to the monthly lease payment, and no front-end out-of-pocket expenses need be paid by you. In certain circumstances, you may be able to negotiate a tenant inducement from the landlord to offset part of these costs.

• For example, in 2015, 34 franchisees opened new Pita Pit restaurants. During lease negotiations, 14 of these 34 franchisees were able to negotiate the landlord’s payment of tenant improvement (“TI”) money, intended to offset the cost of leasehold improvements.

• The average size of these 14 restaurants was 1,444 square feet. The average TI money paid per location receiving these funds was $30,395. There is no guarantee you will receive TI money.

5.  Business License:  $200 to $2,000

6.  Insurance:  $1,500 to $4,500

• You must purchase insurance coverage as required under your lease or sublease, as required by law, and as required by Pita Pit.

7.  Store Launch and Local Marketing Program Package:  $2,500 to $3,500

• You are required to participate in the Store Launch and Daily Discipline Marketing Program which includes a grand opening marketing package. This will require that you purchase certain printed materials.

• Printing supply costs will vary depending upon location specifics, such as whether local ordinances allow you to display an exterior A-Frame sign, banners, flags, etc. and the amount of initial stock of promotional material that you have printed.

• The Store Launch and Local Marketing Program Package will vary with the expected volume of sales and will include a banner, A-Frame sign, sign holder, loyalty cards, direct mailers, car topper and wrap, various menus, sales tracker, free pita cards, various window clings, business cards, letterhead, envelopes, packaging, various coupons, and invoices.

• The Store Launch and Local Marketing Program Package will also include a grand opening marketing campaign to include several advertising and promotional tactics designed to create awareness and drive traffic during the store opening timeframe.

• For the sake of economy, consistency of Names and Marks, and quality control, the printed materials may only be purchased from an approved supplier.

8.  Legal and Accounting Fees:  $500 to $2,500

• Legal and accounting fees include monies needed to create your business entity (e.g. incorporation) and set up its books and records.

9.  Initial Furniture, Fixtures, and Equipment Package:  $65,173 to $89,992

• The Restaurant fixturing package includes kitchen equipment, walk-in cooler/freezer, slicer, chairs, exhaust hood (with fire suppression), griddle, sinks, shelving, electronic cash register or electronic point of sale (POS) system, interior and exterior signage, etc., needed by you to open the Restaurant.

10.  Staff and Management Training Expense:  $1,000 to $3,200

• Expenses in connection with training will vary with the number of people trained and the distance from the training center.

11.  Uniforms:  $1,000 to $1,300

12.  Initial Inventory Package:  $5,000 to $8,000

• The initial inventory package will depend somewhat upon the size of the initial order and size of the store. Such considerations as shipping time, season, store room size, and other factors dictate the size of the initial inventory.

13.  Coca-Cola Freestyle Program Fee:  $0 to $241.50

• You are required to serve Coca-Cola fountain beverages, utilizing either Coca-Cola’s 9000 or 7000 Freestyle fountain soda dispenser. You may select which Freestyle fountain dispenser you will use.

• The program fee covers rental of the Freestyle equipment, mechanical reactive and reasonable preventive service, standard wireless connectivity, and accumulation of standard consumption data.

14.  Additional Funds (for 3 months):  $25,650 to $31,500

• This is an estimate of your initial start-up expenses for the first 3 months of operation. It includes payroll, supplies, online ordering service, utilities, and ordinary maintenance.

• This estimate does not include the Continuing Fee (royalties), General Advertising Fund Fee, food and beverage costs, or your rent for months 2 and 3 (which may be $1,200 to $5,000 per month depending on your location and local vacancy rates). It does not include a franchisee’s salary.

• This estimate does not reflect any sales revenue you may earn from operations which may help you offset these expenses.

15.  Local Advertising:  1% of Net Sales of the Restaurant

• Under the Franchise Agreement, you must spend 1% of your Net Sales on local advertising each year.

16.  Laptop Computer:  $450 to $1,500

• You are required to purchase a laptop which should be brought to training at Pita Pit’s National Training Center. The laptop must meet certain minimum hardware and software specifications.

17.  Totals:  $211,362 to $366,453.50

• The total does not include your personal living expenses, applicable taxes (including state sales and use tax which may be applicable to the Furniture, Fixtures, and Equipment, and other items required to open your Restaurant), and local advertising.

• Pita Pit has relied on its experience granting franchises in the United States to provide these estimates. There may be regional differences that it has not considered.

• If you exercise your option to sell Pita Pit’s smoothie line of products, you will have additional investment costs (estimated to range from $6,050 to $8,200).

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