Franchise Costs: Detailed Estimates of Carvel Franchise Costs (2017 FDD)

This post was updated on October 3, 2017 to reflect information from Carvel’s 2017 FDD (Item 7).

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

For Full Shoppe

1.  Initial Franchise Fee:  $30,000

2.  Real Estate:  Amount Not Specified

3.  Leasehold Improvements:  $80,000 to $136,000

• Carvel franchisees typically lease Shoppe premises under a written agreement. You make monthly rental payments directly to your landlord. The annual rent varies with the location and size of the premises.

• You must establish the Shoppe at your own expense. This includes:

• buying or leasing a building or store premises (typically 800 to 1,600 square feet for a Full Shoppe, and 100 to 500 square feet for an Express Shoppe or Hosted Express Shoppe);
• building the Shoppe out to Carvel’s specifications;
• purchasing exterior trademarked signs;
• purchasing or leasing frozen dessert manufacturing and merchandising equipment, utensils, related trade fixtures, and furnishings; and
• purchasing inventory used in the manufacture, preparation, and dispensing of Carvel products.

• You pay for these items and services. The cost varies for each Shoppe according to the location (i.e. shopping center, free-standing location, suburban, downtown, etc.), the amount of equipment, the construction or alteration costs, and the services involved.

• You generally must provide a security deposit to your landlord and you must negotiate the terms under which the security deposit is refundable.

• You must select the location for your Shoppe. Carvel expects you to retain an independent expert to evaluate the proposed site. Carvel cannot estimate the cost of this expert, which will depend on such factors as the intended area, expertise, and the extent to which studies or surveys are necessary.

• If you are opening a Hosted Express Shoppe, these costs will likely be incurred in connection with locating and leasing the site for the Host Facility.

4.  Architect:  $7,500 to $10,000

• You must hire an architect at your own cost, subject to Carvel’s approval, to make any necessary changes to the standard equipment layout and specifications for a Shoppe. The cost of these architectural services will depend on the size and shape of the premises and is generally not refundable.

5.  Permits and Licenses:  $1,500 to $10,000

• You must obtain and pay for all necessary permits, licenses, and security deposits, including security deposits for utilities and other necessary prepaid expenses. Security deposits may be refundable in certain situations, but permits and license fees generally are not refundable.

6.  Signs and Graphics:  $5,000 to $9,500

7.  Equipment, Millwork, Furniture, Fixtures, and Point-of-Sale System:  $94,000 to $160,000

8.  Molds and Smallwares Package:  $4,000 to $9,000

9.  Subtotal:  Capital Investment:  $222,000 to $364,500

10.  Opening Inventory:  $7,600 to $10,000

• You must purchase a sufficient initial inventory of Approved Products to open the Shoppe.

11.  Training Expenses:  $1,700 to $3,000

12.  Security Deposits:  $1,500 to $6,000

13.  Business Insurance:  $2,000 to $9,000

• You must obtain and maintain during the term of your Franchise Agreement, at your expense, a comprehensive business insurance program, including property, commercial general liability, automobile liability, business property, umbrella, and workers’ compensation insurance.

• In addition, Carvel may require you to maintain employment practices liability insurance and cyber liability insurance with limits up to $1,000,000.

• This figure estimates the cost of your insurance premiums for your first year of operation based on Carvel’s minimum requirements.

• It is difficult for Carvel to estimate the cost of required insurance, since the cost varies widely depending on such factors as the size and location of the Shoppe premises, the gross sales actually achieved, the other types of insurance coverage included in the policy, and the value of the items insured.

14.  Additional Funds (3 months):  $10,800 to $18,000

• This estimates the funds needed to cover your expenses during the first 3 months of operation.

• You will need capital to support ongoing expenses, such as payroll, uniforms, supplies, initial advertising, and miscellaneous expenses. These purchases are generally not refundable.

• These expenses include payroll costs (excluding any wage or salary paid to you), other miscellaneous expenses, and working capital.

15.  Grand Opening Advertising:  $5,000

• You must spend at least $5,000 for a grand opening advertising program for each Full Shoppe and each Express Shoppe (“Grand Opening Obligation”).

• For a Hosted Express Shoppe, the amount of the Grand Opening Obligation will be reduced to an amount not to exceed $3,000.

• These purchases are generally not refundable.

16.  Subtotal:  Opening Expenses:  $28,600 to $51,000

17.  Total Initial Investment:  $250,600 to $415,500

• The figures above include estimated labor, utilities, and miscellaneous supplies, but do not include rent, real estate costs, royalty and advertising fees, replacement inventory, and packaging, etc.

• Carvel and its affiliates do not finance your initial investment. The availability of financing will depend on such factors as the availability of financing generally, your creditworthiness, collateral you pledge, policies of your lending institution, and economic conditions in your area.

For an Express Shoppe

• The total estimated initial investment necessary to begin operation of a Carvel Express Shoppe ranges from $39,600 to $133,400.

For a Hosted Express Shoppe

• The total estimated initial investment necessary to begin operation of a Carvel Hosted Express Shoppe ranges from $33,040 to $58,365.

• The range of estimated costs relates to a Hosted Express Shoppe being built in connection with the construction of a Host Facility, so that a number of costs already being incurred to build-out and begin operating the Host Facility (e.g. permitting, insurance, construction of leasehold improvements, equipment, etc.) would often alleviate or reduce many of the costs that would otherwise apply to build out the Hosted Express Shoppe.

• These figures do not include any of the costs relating to the investment required for the Host Facility.

• If you are building a Hosted Express Shoppe that will be located in an existing Host Facility, you should review the range above for the standard Express Shoppe that is not located in a new Host Facility.