Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Applebee’s Franchise Costs (2016 FDD)

by Franchise Chatter on February 4, 2014

in Franchise Costs, Restaurant Franchise

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Applebee's Ultimate Trio Photo by mooshee85

This post was updated on July 24, 2016 to reflect information from Applebee’s 2016 FDD (Item 7).

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

  • The following table shows the franchisor’s current estimates of the initial investment likely to be required for the development and opening of Applebee’s newest restaurant prototype.
  • The low range of the costs in the table typically reflects the franchisor’s estimate of costs for a 169-seat version of the newest prototype.
  • The high range of the costs in the table typically reflects the franchisor’s estimate of costs for a 225-seat version of the newest prototype and also takes into account some add-ons that may increase the investment cost, including enhanced fire alarm systems, pylon signs, and costs relating to expanding the restaurant to accommodate up to 275 seats.
  • The figures in the table reflect the franchisor’s estimate of your initial investment from the time you sign a Development Agreement through approximately 3 months after you open your first Restaurant.
  • The estimates for construction costs are based on the most recent costs or on the expected costs for franchisees’ Restaurants to be opened in 2016.

1.  Initial Organizational and Training Expenses (incorporation, legal and accounting fees, training, site location, and miscellaneous expenses):  $75,000 to $120,000

2.  Purchase of Land:  $272,000 to $1,450,000

  • The cost to purchase land varies because of geographic location. If you do not purchase the land and building for the Restaurant, you will need to lease this property.
  • Typical annual rents, which vary widely depending on factors like size, location, and condition of the leased premises, range from 2% to 8% of the Restaurant’s gross sales per year.
  • Also, you might incur certain construction or remodeling costs for necessary leasehold improvements.
  • Free-standing Restaurant sizes using the newest prototype range from approximately 4,961 square feet (seating 200) to approximately 5,410 square feet (seating 225) and Restaurants located in strip centers, shopping centers, and malls generally require more square footage to achieve the same seating.

3.  Building Costs (purchase, construction, remodeling, etc.):  $556,000 to $2,600,000

4.  Site Work:  $50,000 to $500,000

5.  Professional Services:  $30,000 to $211,000

6.  Permits/Fees:  $1,500 to $75,000

7.  Furniture, Fixtures, Equipment, and Signage:  $410,000 to $750,000

  • You may wish to install additional signage which costs approximately $15,000 to $30,000 for a monument sign and $25,000 to $35,000 for a 35-foot pylon sign.
  • In addition, if you require a security system and fire alarm, it will cost approximately $25,000 to $30,000. Cost may vary by region, as well as engineering and material costs.

8.  Point of Sale System:  $20,000 to $35,000

  • You must install the hardware, operating system, and software required to equip the Restaurant with a POS that the franchisor approves. You must have a network in place before operating the system.
  • Typically, you will use 5 to 7 POS workstations with guest check printers and a Kitchen Display system consisting of 4 to 5 displays.
  • The franchisor frequently tests new technology and service models for use by franchisees. These technologies may require additional costs for installation and supplies. The new technologies, when implemented, will become part of the System.

9.  Smallwares (dishes, silverware, other utensils, etc.):  $25,000 to $35,000

10.  Initial Inventory:  $25,500 to $47,300

11.  Pre-Opening Expenses (insurance, legal, accounting, personnel, and training expenses):  $55,000 to $100,000

12.  Initial Franchise Fee:  $35,000

  • When you sign the Development Agreement, you must prepay a portion of the total franchise fees for the Restaurants the franchisor requires you to develop during the initial years of the Development Agreement.
  • This amount will vary based on your development obligations during the “initial development periods”. The franchise fee deposit will equal $10,000 per Restaurant.
  • Application of a part of the franchise fee deposit reduces the franchise fee. The 2 installments are due as follows:  50% when you sign the Franchise Agreement and the remaining balance 14 days before you are scheduled to open the Restaurant.

13.  Initial Advertising Expense:  $5,000 to $40,000

  • You must conduct an advertising campaign to promote the opening of the Restaurant, and the franchisor will reimburse you for 50% of your expenditures for opening advertising up to a maximum of $2,500 if you comply with the requirements described in the Franchise Agreement and the Field Marketing Internet.

14.  Liquor License(s):  $500 to $400,000

  • The amount necessary to obtain a liquor license varies greatly depending on the city, county, and state licensing authority involved and may be based on whether a license is available from the licensing authority or must be purchased from a third party.

15.  Apple Supply Chain Co-Op Stock Purchase:  $100

  • You are required to become a member of the Apple Supply Chain Co-op, Inc., a Delaware Corporation (“Apple Co-op”); therefore, you must purchase 1 share of Apple Co-op stock for $100.

16.  Additional Funds – 3 Months:  $405,000 to $655,000

  • This estimates your initial expenses for 3 months of operation. These expenses include working capital, payroll costs, food and liquor costs, utilities, ordinary maintenance, local advertising, royalty fees, advertising fees, telecommunication services, Internet, and other expenses normal in operating a Restaurant.
  • This does not include amounts to cover your salary or draw or personal expenses.

17.  Total:  $1,965,600 to $7,053,400

  • The figures do not include the applicant’s fee of $15,000. The franchisor relied on the experience of its affiliates and franchisees who provided projected or actual costs of Restaurants to compile this estimate.

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