Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Dunkin’ Donuts Franchise Costs (2017 FDD)

by Franchise Chatter on January 19, 2014

in Donuts Franchise, Franchise Costs

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Dunkin' Donuts Store Exterior

This post was updated on May 17, 2017 to reflect information from Dunkin’ Donuts’ 2017 FDD (Item 7).

Detailed Estimates of Dunkin’ Donuts Franchise Costs Based on Item 7 (Estimated Initial Investment) of Dunkin’ Donuts’ 2017 Franchise Disclosure Document

Freestanding Restaurant

  • A freestanding restaurant is a restaurant, either newly constructed or an existing structure (to be retrofit), that does not share any common walls with any third-party.
  • The typical freestanding restaurant has separate production and eating areas, seating from 10 to 40 customers.
  • The franchisor does not typically offer financing of any of the costs below.

1.  Initial Franchise Fee (2o year term):  $40,000 to $90,000

2.  Building Costs:  $94,000 to $570,000

  • Building costs include the cost to construct a building. The franchisor estimates that a freestanding building will cost $61 to $573 per square foot (estimating 1,000 to 2,500 square feet).

3.  Site Development Costs:  $3,900 to $294,500

  • Site development costs include the costs to develop the land and other site improvements, including exterior landscaping, electrical and water hookup, paving, sidewalks, lighting, etc.
  • Some local governments may charge an additional amount for utility connections to offset their costs for maintaining water and sewer plants; these amounts are not included in the above figure.
  • Costs can be higher if soil problems or other environmental issues are encountered.
  • These ranges do not include unusual costs to bring utilities to the property for hookup, or government imposed “impact fees.”
  • Buildings that have a drive-thru window tend to cost more to build and take longer to build than restaurants without a drive-thru window due to permitting, design, and other factors.
  • The low-end of the range above is the estimated cost for you to negotiate a build-to-suit lease in which the landlord incurs most development costs, and you make a lease deposit.
  • These estimates are based on the franchisor’s experience and information provided by franchisees.

4.  Additional Development Costs:  $4,600 to $149,000

  • Additional development costs include, among others, architectural, engineering, and legal fees. These estimates do not include extraordinary costs due to extensive redesign, permitting, variances, environmental issues, legal obstacles, etc.

5.  Real Estate Costs:  Amount Not Specified

  • Real estate costs vary considerably according to the type of restaurant, real estate values in your area, your real estate interest (leasehold or ownership), location, size of the site, code requirements and other factors, including labor, as well as whether you, your landlord, or the franchisor develops the restaurant.
  • Your building costs referenced in No. 2 above may be significantly lower if the franchisor or your landlord develops the location, but your real estate costs, including your annual rent, will probably be higher.
  • If you elect to buy land, it can cost an additional $100,000 to $1,200,000 (or more).

6.  Equipment, Fixtures, and Signs:  $54,000 to $269,000

  • This amount includes estimated costs of furnishings, installations, equipment, trade fixtures, small-wares, and certain other items on the restaurant’s premises, the amount and specific items of which will vary depending upon the location, size, and condition of a particular restaurant.
  • Cost range includes tax and delivery estimated at 10%.

7.  Electronic Cash Register / Retail Technology System:  $24,700 to $61,000

  • The price range reflects equipment configurations and solution costs, site preparation, and installation for two to four point of sale systems.
  • The price range also reflects the configurations and solution costs, site preparation, and installation for the non-point of sale Retail Technology Systems components that are required.

8.  Opening Inventory:  $8,000 to $20,000

  • Your initial inventory of merchandise and supplies needed for the operation of the restaurant will include raw ingredients and products for resale, containers and other paper, plastic, or similar goods, maintenance and cleaning materials, office supplies, and miscellaneous materials and supplies.

9.  Miscellaneous Opening Costs:  $9,500 to $70,000

  • Miscellaneous opening costs include pre-opening employee training payroll, utility deposits, petty cash, distribution center refundable fee, and miscellaneous expenses (interior landscaping plants, sound system, office supplies, licenses and permits, banking pre-opening costs, public telephone deposit, etc.).

10.  Licenses, Permits, Fees, and Deposits:  $3,500 to $5,500

  • The above does not include government imposed “impact fees.” The franchisor estimates such fees, when imposed, can be $87,000 or more in some markets. Some local governments may also require a performance bond, which is not included in the above range.

11.  Uniforms:  $400 to $1,200

12.  Insurance:  $4,500 to $16,000

  • You must provide commercial general liability coverage with minimum limits in the amount of $2,000,000 per occurrence, employment practices liability coverage with minimum limits in the amount of $1,000,000 per occurrence, all risk property coverage, plate-glass coverage, and employers’ liability and workers’ compensation insurance, and maintain other insurance in accordance with the franchisor’s published standards (subject to change) and maintain other insurance in accordance with state law requirements.

13.  Travel and Living Expenses While Training:  $2,000 to $35,000

  • The above estimated range of costs is for two people to attend the Dunkin’ Donuts initial training program for 4 to 8 weeks (depending on production platform and the opportunity to support a new restaurant opening), including transportation, board, lodging, sanitation exam, and uniforms.
  • Any wages or salaries that you may pay trainees while they attend training are not included in these estimates. You must also maintain workers’ compensation insurance coverage for trainees in your employ.

14.  Marketing Start-Up Fee:  $0 to $10,000

  • Marketing Start-Up fees are used to promote the opening (or re-opening) of your restaurant and are applicable for new, remodeled, or relocated restaurants.

15.  Additional Funds for First 3 Months of Operation:  $0 to $100,000

  • You may or may not need working capital to support ongoing expenses that are not covered by sales revenue. New businesses may generate negative cash flow. These figures are estimates and the franchisor cannot guarantee that you will not have additional expenses in the first three months of operation.

16.  Totals:  $249,100 to $1,691,200

Shopping Center/Storefront Restaurant

  • The total estimated initial investment necessary to begin operation of a shopping center/storefront Dunkin’ Donuts restaurant ranges from $228,620 to $1,197,245.

Gas/Convenience Store Restaurant

  • The total estimated initial investment necessary to begin operation of a gas/convenience store Dunkin’ Donuts restaurant ranges from $103,903 to $735,100.

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