Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Papa John’s Franchise Costs (2017 FDD)

by Franchise Chatter on July 2, 2013

in Franchise Costs, Pizza Franchises

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Papa John's Pizza Photo by JillOW

This post was updated on June 20, 2017 to reflect information from Papa John’s 2017 FDD (Item 7).

Detailed Estimates of Papa John’s Franchise Costs Based on Item 7 (Estimated Initial Investment) of Papa John’s 2017 Franchise Disclosure Document

Standard Restaurant

1.  Initial Franchise Fee:  $0 to $25,000

  • Under the 2017 Development Incentive program or the Enterprise Zone Incentive, you will pay a $5,000 deposit per restaurant upon signing the Development Agreement. If a restaurant opens on time (on or before the date specified in the Development Agreement), the deposit will be refunded and no initial franchise fee will be required.
  • If you do not qualify for an incentive program, the Initial Franchise Fee is $25,000 and is not refundable.
  • If a restaurant does not open on time, Papa John’s will retain the $5,000 deposit applicable to the restaurant as a development fee.

2.  Real Estate Brokerage Fees:  $0 to $10,000

  • These fees represent commissions payable to real estate brokers in connection with securing possession of a site for the restaurant, whether by lease or purchase.

3.  Professional Fees:  $500 to $12,000

  • These represent fees payable to professional advisors (attorneys and accountants) in connection with evaluation of the franchise, real estate, and other contracts, as well as any other matters.

4.  Construction/Leasehold Improvements:  $50,000 to $500,000

  • These amounts apply to a restaurant located in leased space in a shopping center or strip center. The square footage of a restaurant is estimated to be 1,200 to 1,600 square feet.
  • Papa John’s estimates leasehold improvements for an in-line restaurant range from $40,000 to $200,000. If the restaurant will be located in an existing free-standing location, the company estimates these costs can go as high as $300,000. If you elect to construct a new building for the restaurant, the company estimates these costs could be up to $500,000.
  • These costs include charges for architects or engineers, which can range from $250 to $30,000.
  • The estimates includes permit and impact fees, which can range from $1,000 to $20,000 or more.

5.  Furniture, Fixtures, and Equipment:  $30,000 to $120,000

  • The low end of the range assumes that you take over an existing restaurant space with some of these items already in place. The low end also assumes that you qualify to lease an oven set, at no cost to you for two years, pursuant to the 2017 Development Incentive program or the Enterprise Zone Incentive.
  • The high end of the range assumes that all new equipment is purchased, including two ovens.
  • An equipment package for a 1,400 square foot restaurant averages $95,000.

6.  Information System:  $20,000 to $30,000

  • Papa John’s will require you to purchase, lease, or obtain the Information System. Papa John’s is currently the only approved supplier.

7.  On-Site Support Fee:  $0 to $2,500

  • This fee is for in-store support on the Information System.

8.  On-Site Installation Fee:  $0 to $5,000

9.  Help Desk Support Fee:  $0 to $1,000

  • You have the option of subscribing to the company’s Help Desk Services for a flat fee of $70 per month or paying on a fee-for-service basis. The fee-for-service rate is currently $80 per hour with a 1/2 hour minimum charge. These rates are subject to change.

10.  Software Enhancement Fee:  $420

11.  Signage:  $3,000 to $20,000

12.  First Month’s Rent:  $1,200 to $5,000

13.  Security Deposit and Other Deposits, Insurance Premium:  $500 to $8,500

14.  Opening Inventory and Supplies:  $3,000 to $10,000

  • The difference between the low and high ranges is attributable to the actual size of the restaurant and the amount of the food products, materials, and supplies that you order. Papa John’s will offer guidance and suggestions as to the proper amounts.

15.  Grand Opening Advertising:  $3,000 to $10,000

16.  Training Expenses:  $1,000 to $15,000

  • The estimated range includes expenses for transportation to the certified training restaurant or Papa John’s University located at corporate headquarters in Louisville, Kentucky, lodging, and meals for one person based on a seven week training period.
  • Training is required for your Principal Operator, supervisors, and restaurant managers before your first restaurant is opened.
  • Training materials will average $100 to $250 per trainee.

17.  Miscellaneous Opening Costs:  $2,500 to $20,000

  • This item covers miscellaneous opening costs and expenses, such as installation of telephones, business licenses, and recruiting and opening team training costs.

18.  Total Estimated Initial Investment (Pre-Opening):  $115,120 to $794,420

19.  Additional Funds – 3 Months:  $15,000 to $50,000

  • This item estimates your initial start-up expenses for a three-month period and assumes you pay the maximum estimated figure for monthly rent. These expenses include payroll costs for one restaurant manager and other restaurant employees, but do not include any draw or salary for you. This item does not include royalty or advertising payments, which will be based on your revenue.

20.  Total Estimated Initial Investment (Pre-Opening and First 3 Months of Operation):  $130,120 to $844,420

  • Papa John’s relied on its 30 years of business experience and that of its predecessors and affiliates to compile these estimates, and on information that it has obtained from current franchisees.

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