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Franchise Costs 2013: Detailed Estimates of Five Guys Burgers and Fries Franchise Costs (2013 FDD)

by Franchise Chatter on August 20, 2013

in Franchise Costs, Hamburger Franchise

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Detailed Estimates of Five Guys Burgers and Fries Franchise Costs Based on Item 7 (Estimated Initial Investment) of Five Guys’ 2013 Franchise Disclosure Document

1.  Initial Franchise Fee:  $25,000

  • You must pay an initial franchise fee of $25,000 when you sign a Franchise Agreement. The initial franchise fee is non-refundable under the terms of the Franchise Agreement, except that the franchisor currently has a policy under which it may refund 75% of the initial franchise fee if you are unable to locate an acceptable site within 6 months after signing your Franchise Agreement.

Five Guys Burgers and Fries Franchise Photo by Lodigs2.  Development Fee:  $50,000 ($75,000 in Puerto Rico)

  • You must pay a Development Fee of $50,000 ($75,000 in Puerto Rico) multiplied by the total number of Restaurants to be developed under the Development Agreement, even if it is only one Restaurant.
  • The Development Fee is non-refundable and will vary depending upon the number of Restaurants you commit to develop in your territory.

3.  Leasehold Improvements:  $100,000 to $300,000

  • These amounts are based on the cost of adapting the franchisor’s prototypical architectural and design plans to remodel and finish-out the Restaurant and the cost of leasehold improvements.
  • These figures are based on the franchisor’s best estimate based on remodeling/finish-out rates and conditions in the Washington, D.C. metropolitan area and some estimates from other general contractors based in the United States.
  • These amounts may vary substantially based on local conditions, including the availability and prices of labor and materials. These costs may also vary depending on whether certain of these costs will be incurred by the landlord.

4.  Lease Payments and Other Rental Expenses:  $7,500 to $20,000

  • The figures are for the first 3 months’ rent and assume that the premises of the Restaurant will be in a strip shopping center or urban location ranging in size from approximately 2,000 to 3,000 square feet. In addition to the rent, landlords will typically require a security deposit which is one month’s rent.
  • Further, the figures assume base annual rental rates ranging from $20 to $30 per square foot. Landlords may vary the base rental rate and/or security deposit and may charge rent based on a percentage of gross sales. In addition to base rent, the lease may require you to pay common area maintenance charges (“CAM Charges”) for the mall or shopping center, your pro rata share of the real estate taxes and insurance for the mall or shopping center, and your pro rata share of other charges.

5.  Equipment:  $55,000 to $105,000

  • You must utilize equipment meeting the franchisor’s specifications to be used in the Restaurant, including a cooking grill, work tables, shelving, oven stand proofer, ice machine, and other related items including smallwares. The franchisor has established relationships with equipment vendors for certain equipment used in Restaurants that meet its specifications.

6.  Signage:  $6,500 to $20,000

  • These amounts represent your cost for menu boards, menu panels, neon logo, and descriptive signs. Your landlord may have different restrictions it places on interior and exterior signage which may affect your costs.

7.  Initial Inventory:  $10,000 to $15,000

  • These amounts represent your initial inventory of food supplies and paper goods for use in the first three months of operating the Restaurant. This amount also includes the $350 for the proprietary hamburger and hot dog buns you must purchase from the franchisor’s affiliate.

8.  Architectural/Engineering:  $7,000 to $25,000

  • These fees are estimates of your costs in obtaining any architectural and design services necessary for the construction of the Restaurant. You must adapt the company’s prototypical plans and specifications for the construction of the Restaurant.

9.  Electronic Cash Register System with Modem:  $15,000 to $25,000

  • The franchisor requires that you use the point-of-sale system that it specifies, have high speed internet access, and an email account to receive communications.

10.  Facsimile Machine:  $350 to $500

11.  Travel, Lodging, and Meals for Initial Training:  $100 to $5,000

  • The franchisor provides initial training to your Operating Principal, general manager, and one assistant manager at no additional charge. These estimates include only your out-of-pocket costs associated with the training of these personnel members (including travel, room, and board). These amounts do not include any fees or expenses for training any other personnel.
  • Training is for not less than 10 days, which may not necessarily be consecutive days.

12.  Business Supplies (stationery, business cards, menus, gift cards, paper, and other materials):  $500 to $15,000

  • You must purchase business cards, brochures, memorabilia, and other written materials for use in the franchise business. You will typically purchase amounts that may last as long as 6 months. You may purchase these materials from the franchisor or independent vendors that it has approved.

13.  Business Licenses, Permits, Utility Deposits, Etc. (for first year)

  • This figure also includes the purchase of a “wine and beer” license from a government authority.
  • These figures do not include occupancy and construction permits which were included in the leasehold improvement costs.

14.  Delivery and Catering Expenses:  $0 to $1,000

  • You are not required to provide catering and delivery services. If you choose, and the franchisor approves you, to provide delivery and catering services from your Five Guys Restaurant, you will need to purchase additional signage for use in/on delivery vehicles, and may incur fuel costs and other additional costs.
  • You are not required to purchase a motor vehicle to be used exclusively for your franchised business. Any existing motor vehicle available for your use is acceptable.

15.  Insurance Deposits and Premiums:  $750 to $1,250

  • These figures are estimates of the first 3 months’ cost of initial deposit/premiums for the insurance you must obtain and maintain for the franchised business.

16.  Additional Funds for First 3 Months:  $20,000 to $25,000

  • Additional items that will need to be purchased or leased include telephone system, music system, floor mats, in store training, uniforms, etc.
  • You must maintain a minimum of $3,000 in your checking account for electronic wire transfer purposes and other costs.

17.  Total:  $306,200 to $666,250

  • This total represents the initial investment for a single Restaurant.

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