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Franchise Costs: Detailed Estimates of Pirtek Franchise Costs (2014 FDD)

by Franchise Chatter on March 29, 2015

in Franchise Costs, Repair Services Franchise



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Pirtek

Detailed Estimates of Pirtek Franchise Costs Based on Item 7 (Estimated Initial Investment) of Pirtek’s 2014 Franchise Disclosure Document

  • The franchise offered is for the right to own and operate a Pirtek hose service center business which will consist of the sale, custom assembly, and installation of industrial and hydraulic hoses, fixed tube assemblies, fittings and related components, and other distinct products and services.
  • The following are the estimated minimum requirements for beginning operations for a Pirtek Business. The estimated minimum requirements will vary depending on factors like your financial condition and the arrangements and business decisions you make.
  • Except where otherwise noted, all fees that you pay to Pirtek are non-refundable. Third-party lessors and suppliers will decide if payments to them are refundable.

1.  Initial Franchise Fee:  $50,000

  • You must pay at least one-half of the Initial Franchise Fee when you sign the Franchise Agreement and the balance of the Initial Franchise Fee prior to attending the initial training program.

2.  Shop Set-up Fee:  $12,000

  • You must pay the Shop Set-up Fee on or before the first day of the initial training program.
  • In connection with the Shop Set-up Fee, Pirtek will spend approximately 10 to 20 business days at your Center prior to opening, to generally get you ready to open your Center for business.

3.  Pirtek Data System and Computer Connection Fee:  $5,000 to $11,000

  • The amount of this fee varies based on factors unique to your business (such as strength of internet connection and others) that may necessitate special hardware or other unique components to achieve a network connection.
  • You must pay the Pirtek Data System and Computer Connection Fee before you commence business operations.

4.  Training:  No separate fee for initial training because it is included in the Initial Franchise Fee; $5,000 to $15,000 for expenses (which is $1,000 to $3,000 per person)

5.  Leasehold Improvements:  $5,000 to $40,000

  • The Pirtek Center premises will ordinarily be leased rather than owned. Pirtek estimates that the average center will have approximately 2,000 to 4,000 square feet or more.
  • Your initial investment for leasehold improvements will vary depending upon local labor costs and whether the building is a completed structure immediately adaptable to installation of necessary fixtures and equipment, or a location where construction is in progress.
  • These variables affect how different obligations will be distributed between landlords and tenants under different lease agreements, and the costs of acquisition and construction.
  • Pirtek must approve all leasehold improvements prior to construction.
  • Although the cost of leasehold improvements will vary depending upon the above-described factors, Pirtek estimates that the average cost of leasehold improvements will range between $5,000 and $40,000 or more.

6.  Signs and Equipment:  $65,000 to $80,000

  • Your investment in signs and equipment is highly variable for your Pirtek Center. The investment depends to a great extent on the size and location of your proposed center, local labor costs, current prices charged by equipment suppliers, discretionary expenditures, inflation, financing costs, and similar factors beyond Pirtek’s or your control.
  • In order to ensure uniform quality of products and services throughout the Pirtek system, you must purchase or lease signs and equipment that Pirtek has approved. Pirtek estimates that under average conditions, you may expect to incur costs for these items between $20,000 and $80,000 or more.
  • The parties will determine the precise amount of any initial or periodic equipment payments at the time of the transaction. The payments ordinarily are not refundable.
  • Investment obligations beyond the initial cash outlay requirements will be necessary, and you may finance at your discretion.
  • Market forces will determine loan repayment totals, and interest on borrowings will be determined by market forces at the time of any financing transaction.

7.  Mobile Sales and Service Units:  $50,000 to $100,000

  • Pirtek requires that you operate at least 3 Mobile Sales and Service Units (MSSUs) when you open your Business. You must purchase or lease the MSSUs from approved third-party suppliers and outfit them with approved MSSU equipment purchased from Pirtek.

8.  Prepaid Rent and Security Deposit:  $2,000 to $5,000

  • You usually will be required to pay one month base rent as a security deposit to the landlord. Pirtek estimates that for a center having 2,500 square feet, the rental obligations will be approximately $8 to $13 or more per square foot base rent per year.
  • Leases also usually impose an obligation toward maintenance costs, insurance charges, real estate taxes and special assessments, utility charges, water and sewer charges, security charges, and other similar charges.

9.  Opening Inventory:  $65,000 to $120,000

  • You must purchase the opening inventory from Pirtek. The amount for this item is payable in lump sum and is not refundable.

10.  Insurance Premiums:  $20,000 to $40,000

11.  Utility Deposits and Business Licenses:  $1,000 to $3,000

  • This amount includes utility deposits and business licenses. Deposits are generally refundable, but license fees are not.

12.  Attorneys’ Fees:  $2,000 to $5,000

  • This amount is an estimate for attorneys’ fees in connection only with your purchase of the franchise.

13.  Additional Funds – 3 Months:  $50,000 to $100,000

  • This amount estimates your initial pre-opening and start-up expenses not otherwise mentioned in the table, including advertising, employee wages, taxes, and telephone hook-up.
  • The amounts are estimates based on Pirtek’s estimate of average costs and market conditions prevailing as of the date of the Disclosure Document and Pirtek’s 10 years of experience in the business.
  • Pirtek cannot guarantee that you will not have additional expenses starting your Business.

14.  Total:  $332,000 to $581,000

  • The total is an estimate of your initial investment and is based upon Pirtek’s estimate of average costs and market conditions prevailing as of the date of the Disclosure Document and Pirtek’s 10 years of experience in the business.



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{ 2 comments… read them below or add one }

Scott Layer March 22, 2016 at 3:36 am

I can tell you that all the ranges quoted are low. You won’t get three vans, enough people and enough training for your money. But boy , will they stick it to you on the computer fees and territory fee and over-stock you with inventory. PIRTEK has closed or terminated more locations than have been successful.

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micke July 18, 2016 at 5:22 am

Pirtek is a very interesting model. Even though the franchisor takes 1/3rd of your hard earnings through fees, vans and high cost of products that could be purchased cheaper elsewhere, some of the franchisees made good money. The model started well but over the years the competition has increased- of course with lower cost and hence lower prices. This is making newer franchisees make less money than if they could get a job in the real world. Greed seems to be the reason

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