Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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

by Franchise Chatter on February 15, 2014

in Chicken Franchises, Franchise Costs

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Zaxby's in Gulf Shores, AL

This post was updated on December 5, 2016 to reflect information from Zaxby’s 2016 FDD (Item 7).

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

1.  Initial Franchise Fee:  $35,000

  • Upon signing the Development Agreement, you will remit to the franchisor 50% of the aggregate initial franchise fees to be paid for all Restaurants to be opened under the Development Agreement and the remaining 50% of the initial franchise fee for each Restaurant upon the franchisor confirming your site by execution of the License Agreement for that Restaurant.

2.  Lease Deposit and Payment:  $13,000 to $20,000

  • Your landlord may require a lease deposit and will typically require monthly rent in advance. Rent will vary depending upon the location of the premises and other related factors. The prepaid rent is usually nonrefundable, but that will ultimately be determined by the terms of the lease.
  • The Restaurant must be a stand-alone facility with drive-thru capability. The improved space for a new farmhouse prototype Restaurant is between 2,788 to 4,155 square feet. The typical lot size for a Restaurant is between 0.8 and 1.5 acres.
  • A landlord will typically require a monthly rent based on a 8% to 12% annual capitalization rate of the landlord’s costs and expenses for the real estate and improvements.
  • Unimproved real estate for a Restaurant will typically cost between $350,000 and $900,000. Improvements made to an unimproved lot for a new farmhouse prototype Restaurant, depending on the type of building and the size/number of customer seats, will typically cost between $1,200,000 to $1,400,000.
  • In certain limited instances, Zaxby’s may permit you to develop its prior prototype Restaurant for which improvements made to an unimproved lot will typically cost between $922,000 to $1,365,000.
  • Real estate with an existing restaurant facility will typically cost between $450,000 and $1,200,000, but Zaxby’s currently only has limited data on the cost of retrofitting an existing restaurant facility to its new farmhouse prototype.

3.  Utility Deposits:  $0 to $9,000

  • Most utilities, such as local water, sewer, gas, electric, and telephone companies, require deposits prior to initial services.

4.  Initial Inventory:  $5,000 to $20,000

  • The Restaurant’s initial inventory requirements will include chicken, dry goods, sauces, refrigerated goods, batters, paper goods, and other food and non-perishable items.

5.  Furniture, Fixtures, and Equipment:  $227,000 to $305,000

  • This estimate includes the cost of purchasing booths, tables, chairs, menu boards, decor items, office supplies, refrigeration and cooking equipment, shelving, sinks, smallwares, and drive-thru timer system as described in the Manual.
  • The estimated costs include purchase price, delivery, and installation.

6.  POS System:  $25,600 to $27,000

  • This estimate includes the cost of the hardware purchased and software licensed from the franchisor’s designated supplier, as well as the initial cost of the annual payment for the software maintenance contract, help desk service, and MyMicros/MyInventory service.

7.  Signage:  $15,000 to $25,000

  • A Restaurant is generally outfitted with a sign with open channel neon letters over the Restaurant and pole signs which must be approved by the franchisor. The estimated costs represent manufacture and installation. This cost is substantially more if you elect to utilize an interstate type signage.

8.  Initial Marketing Contribution:  $5,200 to $10,000

  • You must submit to the franchisor no later than 5 days prior to the date of opening of the Restaurant the Initial Marketing Contribution. The franchisor will determine the Initial Marketing Contribution, in its sole discretion, provided that it shall not exceed $10,000.
  • The franchisor will spend your Initial Marketing Contribution on your behalf pursuant to your initial marketing plan prior to or during the first 120 days of operation of the Restaurant.

9.  Insurance:  $1,000 to $11,000

  • You must obtain and maintain on a primary and non-contributory basis at least a commercial general liability policy, commercial automobile liability policy, commercial property liability policy, workers’ compensation/employer’s liability policy, umbrella liability policy, employment practices liability policy, and cyber and privacy policy.

10.  Permits and Licenses:  $2,000 to $15,000

  • This amount represents the estimated fees you will pay to apply for various permits and licenses, such as building permits, sales tax permits, incorporation fees, fire inspection fees, and health department inspection fees.

11.  Accounting and Legal Fees:  $500 to $25,000

  • These fees will be paid to professionals that assist you in the review of the franchise opportunity, negotiation of leases and contracts related to the development of the Restaurant, establishment of the licensee-entity (if needed), and set-up of the accounting and related systems for the Restaurant.

12.  Printing/Business Supplies:  $300 to $1,000

  • This estimates the cost of certain required pre-printed materials, such as business cards, letterhead, envelopes, checks, gift certificates, and menus. All of these items must use the franchisor’s approved artwork and otherwise meet the specifications in the Manual. They must also be purchased from an approved supplier.

13.  Uniforms:  $1,400 to $3,300

  • This estimates the cost of certain required uniforms, including aprons, t-shirts, nametags, and caps. All of these items must use the franchisor’s approved artwork and otherwise meet the specifications in the Manual. They must also be purchased from an approved supplier.

14.  Training Expenses:  $10,000 to $25,000

  • These expenses include the cost of transportation, meals, accommodations, and similar expenses associated with the attendance of 4 people at the required portions of initial training.

15.  Pre-Opening Payroll:  $10,000 to $37,000

  • This amount represents payroll expenses associated with pre-opening training, initial employee meetings, cleaning, preparation, stocking, organizing, decorating, and last minute details for the entire staff.

16.  Additional Funds – 3 Months:  $1,000 to $96,000

  • This figure is an estimate of anticipated working capital required during the first 3 months of a Restaurant’s operation.

17.  Total:  $352,000 to $664,300

  • The franchisor is unable to calculate the exact investment required of each licensee due to the many factors that influence the total project costs. The franchisor based these estimates on its affiliates’ and licensees’ experience in operating numerous Restaurants.

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