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 (2016 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 May 8, 2016 to reflect information from Papa Murphy’s 2016 FDD (Item 7).

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

1.  Franchise Fee:  $25,000

  • You must pay the franchisor a non-refundable Franchise Fee of $25,000 when you sign the Franchise Agreement for the purchase of your Franchised Store.

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

3.  Leasehold Improvements:  $70,000 to $153,000

  • 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 $72 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:  $4,200 to $6,950

6.  Site Surveys:  $2,000 to $2,750

7.  Opening Package (including Equipment and Supplies), Decor, Cabinets, Point-of-Sale System, and Smallwares:  $115,000 to $163,500

  • 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.

8.  Miscellaneous Development Service Fees:  $0 to $1,270

9.  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.

10.  Initial Marketing Fees and Expenses – 6 Months:  $30,000

11.  Franchise Premises Rent – 3 Months:  $3,600 to $18,356

  • 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 2015 was 1,448 square feet and ranges from 939 to 2,959 square feet. The average cost for rent for Franchise Premises opened in 2015, including operating costs, was $36,012 per year and ranges from $14,400 to $73,425 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.

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

13.  Phase 2 and Phase 3 Training:  $0 to $500

  • Training is divided into four required phases which may take up to five and one-half weeks.
  • Phase 2 and Phase 3 training will be provided at no cost to up to two individuals that have signed the Franchise Agreement. The cost of Phase 2 and Phase 3 training is $500 for each additional franchise owner or non-owner attendee.

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

  • Phase 4 training is conducted by the franchisor’s PMI Enterprise Solution partner, NCR. The cost of Phase 4 training is currently $400 per entity for up to two participants. Additional participants may attend at a cost of currently $400 for up to two participants.

15.  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.

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

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

18.  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.
  • The franchisor reserves the right to require you to retain and use a human resources outsourcing firm to provide general human resource support, including but not limited to job description services, human resource compliance support services, management and supervisor training, and payroll services beyond your first year of operation of the Franchise Store.

19.  Additional Funds, Working Capital, and Miscellaneous Expenses – 3 Months:  $10,000 to $50,000

  • 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 $50,000.
  • 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.

20.  Total Estimated Initial Investment:  $279,455 to $492,861

  • 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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