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Franchise Costs: Detailed Estimates of Tim Hortons Franchise Costs (2017 FDD)

by Franchise Chatter on August 28, 2014

in Coffee Franchise, Donuts Franchise, Franchise Costs

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Tim Hortons Photo by Mark 2400

This post was updated on July 16, 2017 to reflect information from Tim Hortons’ 2017 FDD.

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

For Standard Shop

1.  Initial Franchise Fee:  $50,000

2.  Real Estate Taxes, Personal Property Taxes, and CAM Charges:  $1,000 to $22,000

  • Real estate taxes, personal property taxes, and CAM charges will vary considerably, depending on the Shop’s location.

3.  Equipment:  $200,000 to $400,000

  • Equipment must conform to Tim Hortons’ specifications, which vary among Shop types. This expense covers items like bakery and display equipment, other restaurant equipment, fixtures, signage, refrigerators, seating and installation, and delivery. This estimate excludes sales tax.

4.  Real Estate:  Amount Not Specified

  • Real estate costs vary considerably according to the type of Shop, 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 or your landlord develop the Shop.
  • A Standard Shop typically consists of approximately 1,340, 1,776, 1,845, or 2,300 square feet. The recommended size for a Standard Shop is one-half acre to 1.5 acres. A Non-Standard Shop/Kiosk will vary in size depending on the location, but would typically be between 200 and 1,000 square feet.
  • Factors that typically affect your real estate costs include your cost to negotiate your lease (or buy the property); fair market lease values and lease terms in your area; how the costs to renovate or develop the land, building, and other site improvements are allocated between landlord and tenant; and interest costs.
  • Lease terms are individually negotiated and may vary materially from one location or transaction to another.
  • Because of the numerous variables that affect the value of a particular piece of real estate, this initial investment table does not reflect the potential cost of real estate.

5.  Planning, Development, and Design Costs:  $20,000 to $80,000

  • These costs are only applicable if you are developing and will own or lease the property upon which the Shop premises are located. This estimate includes, among other items, architectural, engineering, and design fees, as well as zoning and planning costs, and building, health, and fire permits.
  • These estimates do not include extraordinary costs due to extensive redesign, permitting, variances, environmental issues, legal obstacles, etc.

6.  Site Development Costs:  $100,000 to $400,000

  • These costs are only applicable if you are developing and will own or lease the property upon which the Shop premises are located. This estimate includes the costs to develop the land and other site improvements, such as exterior landscaping, electrical and water hookup, paving, sidewalks, and lighting.
  • 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 estimate provided.
  • Costs can be higher for various reasons. For example, if extensive storm water retention and landscaping is required, or soil problems or other environmental issues are encountered.
  • These ranges do not include unusual offsite costs including costs to bring utilities to the property for hookup, or government imposed “impact fees”.
  • Some local governments may also require a performance bond, which is not included in the above estimate.

7.  Building Costs:  $250,000 to $800,000

  • These costs are applicable if you are developing and will own or lease the property upon which the Shop premises are located. Building costs include the cost to construct a building’s shell structure, prepped for installation of equipment. These costs are only applicable if you are building the Shop yourself.
  • Building costs will vary by geographic region.
  • Building costs for Non-Standard Shops/Kiosks can vary widely depending on kiosk type, physical location within a larger structure, and the size of the leased space. Adding a drive thru to any building type will increase the Building costs.
  • This range of costs does not include metropolitan or unique development areas, or special municipal building and zoning requirements that may present extraordinary acquisition costs.

8.  Training:  $7,900 to $11,800

  • You must attend and satisfactorily complete Tim Hortons’ initial training program before you may open your Shop. Tim Hortons may waive this training for certain franchisees based upon their individual circumstances and experience level.
  • The cost for this training varies based upon whether you are a new or existing franchisee or a branded partner. If you are a new franchisee, the cost is CAD $2,000 (US $1,500 to $2,000 depending upon the conversion rate); an existing franchisee CAD $780 (US $600 to $800 depending upon the conversion rate); a Branded Partner CAD $1,450 (US $1,000 to $1,500 depending upon the conversion rate).
  • The estimated cost for training also includes the costs incurred while attending the initial training program.

9.  Start-up Supplies and Initial Inventory:  $15,000 to $30,000

  • This estimate will cover Tim Hortons’ recommended opening inventory of food items, packaging, cleaning, uniforms, and other supplies.

10.  Professional and License Fees:  $1,500 to $10,000

  • These costs cover legal and accounting fees, and various licenses and permits like occupancy and business licenses. If you are (with the franchisor’s approval) negotiating the purchase or lease of the Shop premises, you should expect to pay approximately $7,000 for legal advice and services you may need in connection with negotiating the purchase or lease of the Shop premises.
  • This does not include legal fees for services provided in conjunction with processing and preparing necessary immigration documentation for non-U.S. citizens.

11.  Development Assistance Fees:  $5,000 to $25,000

  • These costs are applicable if you are developing and will own or lease the property upon which the Shop premises is located. Tim Hortons may provide management and assistance through the site development process for which it may charge you a Development Assistance Fee.
  • The extent of services Tim Hortons will provide and the amount of the Development Assistance Fee you will pay depends on the type of service provided and the amount of time spent on the project.

12.  Insurance:  $2,500 to $21,500

  • This estimate is for the first year’s premium.
  • If you lease or sublease your Shop premises from Tim Hortons or one of its affiliates, you may be required to pay these insurance expenses to it (i.e. Tim Hortons or one of its affiliates), and it will remit these payments to the insurer or landlord.
  • If you own or lease the Shop premises from a third party, you must pay these expenses directly to the insurer or landlord pursuant to your lease.

13.  Initial Advertising and Promotion:  $3,000 to $6,000

14.  Security Deposits:  $0 to $10,000

  • Security deposits may be required by the landlord, utilities, and suppliers.

15.  Additional Funds:  $25,000 to $40,000

  • You will need capital to support on-going expenses, such as cash float, payroll, utilities, and telephone service, if these costs are not covered by Gross Sales. New businesses often generate a negative cash flow.
  • This amount also includes, at a minimum, credit card processing fees between $400 to $3,000, financial management software costs of about $900, and guest Wi-Fi service fees between $115 to $900 (if you purchase the Wi-Fi hardware, your costs for this fee will be at the high-end of this estimate).
  • This amount is an estimate and Tim Hortons cannot guarantee that you will not have additional expenses starting your business.
  • Your costs will depend on factors like your management skill, experience, and business acumen; economic conditions; the local market for your business; competition; and the performance of your Shop. Tim Hortons relied on internal financial records in estimating your needs for additional funds.

16.  Total:  $680,900 to $1,906,300

For Non-Standard Shop/Kiosk

  • The total estimated initial investment necessary to begin operation of a Tim Hortons Non-Standard Restaurant/Kiosk ranges from $257,050 to $933,800. This extremely wide range is due to large differences in Equipment Costs ($100,000 to $350,000); Building Costs ($100,000 to $300,000); Planning, Development, and Design Costs ($0 to $50,000); and Site Developments Costs ($0 to $50,000).

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