Franchise Costs: Detailed Estimates of Freddy’s Frozen Custard and Steakburgers Franchise Costs (2017 FDD)

This post was updated on May 17, 2017 to reflect information from Freddy’s Frozen Custard and Steakburgers’ 2017 FDD (Item 7).

Detailed Estimates of Freddy’s Frozen Custard and Steakburgers Franchise Costs Based on Item 7 (Estimated Initial Investment) of Freddy’s 2017 Franchise Disclosure Document

1.  Initial Franchise Fee:  $25,000

• If the franchisor grants the franchise under a Development Agreement, you must pay a Development Fee equal to $5,000, which is credited against the $25,000 initial Franchise Fee. Freddy’s does not finance any portion of the Development Fee or Franchise Fee.

2.  Training Expenses (Travel, Meals, Lodging, and Employee Wages):  $20,000 to $30,000

3.  Construction, Remodeling, and Leasehold Improvements:  $187,500 to $1,252,102

• The typical restaurant has approximately 3,500 square feet. Most franchisees will operate in stand-alone Restaurants, although some franchisee-operated Restaurants will be located at in-line shopping centers.

• Site improvement and building costs vary widely from location to location, but the franchisor estimates them to range from $187,500 to $1,252,102, not including the cost of land.

• The cost of remodeling the leased premises to meet the company’s design specifications for leasehold improvements depends upon the condition and configuration of the existing retail space and whether or not your landlord agrees to provide an allowance for tenant improvements.

4.  Real Property Rent (one month):  $5,666.67 to $15,750

• Rent varies widely from location to location, but the franchisor estimates the rent (including common area maintenance and similar charges) to range from $68,000 to $189,000 per year depending upon the size, condition, and location of the leased premises.

• If you elect to purchase the site for your Restaurant, your land acquisition costs will vary depending upon a multitude of factors including the size and location of the property and the availability of financing on commercially reasonable terms. The franchisor is unable to estimate the cost of purchasing a site.

5.  Security Deposit:  $5,666.67 to $15,750

• A 1-month security deposit is also generally required, which the franchisor generally estimates to be between $5,666.67 to $15,750.

6.  Computer, Point of Sale Equipment, Outdoor Ordering System and Software, Security Cameras, Drive Thru Headsets:  $45,175 to $71,956

7.  Equipment, Furniture, Fixtures, and Decor:  $247,102 to $375,059

• Cost of equipment, furniture, fixtures, and decor will vary based upon the size of the Restaurant. These costs include all equipment (other than computer and point of sale equipment) necessary to operate the Restaurant including standard fixtures and equipment, indoor and outdoor menu boards, decor, and furniture.

8.  Building Signage, Interior Neon, LED Border:  $18,200 to $90,500

9.  Miscellaneous Opening Costs:  $8,000 to $22,000

• Includes construction insurance, utility deposits, licenses and business permits, pre-paid expenses, company organization costs, and other professional fees and pre-opening costs.

10.  Opening Inventory and Supplies:  $9,000 to $23,000

• This amount represents the cost of food products and condiments and office and store supplies necessary to initially stock the Restaurant for operation.

11.  Insurance:  $9,000 to $23,000

12.  Grand Opening Advertising:  $2,500 to $5,000

• You must conduct a grand opening advertising and promotional program for the Restaurant during the period commencing 14 days before and ending 180 days after its opening and to expend at least $2,500, or, if required by the franchisor, at least $5,000.

• This amount includes the estimated cost of newspaper and radio advertising, circulars, coupons, and other media for the grand opening and for the first three months of business.

• It does not include the Marketing and Advertising Fund contribution of up to 3% of your 28-day period Gross Receipts which you must pay at the franchisor’s discretion, or contributions to any applicable advertising cooperatives of up to 2% of your 28-day period Gross Receipts which, again, you must pay at the franchisor’s discretion.

13.  Additional Funds – 3 Months:  $10,000 to $50,000

• This amount represents an estimate of the funds needed to cover pre-opening expenses, utilities, uniforms, recruitment, in-store training expense, and additional opening capital for other variable costs (e.g. electricity, telephone, heat, etc.), paper, cleaning, and other supplies.

• This amount does not include any amounts payable to you as a draw or salary.

• These estimates of additional funds are based on the franchisor’s past experience in operating affiliate-owned restaurants.

14.  Total Estimated Initial Investment:  $592,810 to $1,999,117

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