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Schlotzsky’s Franchise Costs: Estimated Initial Investment (Item 7, 2022 FDD)

Restaurant at an Endcap or Inline Shopping Center Location

1. Initial Franchise Fee: $35,500

2. Construction and Build Out Costs: $165,000 to $450,000

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This estimate includes fees paid to a general contractor you engage to build out the Restaurant to meet the franchisor’s Standards.

Leasehold improvements include but are not limited to HVAC, electrical, carpentry, floor covering, and painting.

In certain major metropolitan markets such as Boston, Chicago, New York, Los Angeles, San Francisco, Seattle, and Washington, D.C., costs could be significantly higher than the estimates provided here due to local market rates for materials and labor.

In the endcap/inline table, the low estimates are based on a 2,100 square foot endcap or inline location that does not include a drive-thru, and the high estimates are based on a 3,600 square foot endcap location that includes a drive-thru.

You may be able to negotiate tenant improvement allowances from your landlord. The estimate is presented net of estimated tenant improvement allowances. For the low estimate, the franchisor estimated a tenant improvement allowance of $72,000, which is approximately the average tenant improvement allowance that franchisees have reported to the franchisor and its affiliates for similar units. For the high estimate, the franchisor assumed that a tenant improvement allowance was not available.

3. Permitting: $1,800 to $11,000

This estimate includes the cost of acquiring construction permits, including permit fees. In some markets, the costs of required permits may significantly exceed the franchisor’s estimates.

4. Equipment Package: $75,000 to $146,000

You must purchase or lease from an Approved Supplier certain equipment (like kitchen equipment) and machinery that complies with the franchisor’s Standards.

These amounts do not include the costs of any owned, hired, or leased delivery motor vehicles that you may utilize in the operation of the Restaurant. If you offer delivery and catering services under the terms of the Franchise Agreement, you may need to purchase at least one branded catering vehicle equipped per the franchisor’s specifications, which will cost approximately $25,000 to $35,000 if purchased, or $500 to $700 per month if leased, although leased costs may vary significantly.

5. Millwork: $34,600 to $46,000

You will incur expenses for millwork at the Restaurant, which may include the cost of purchasing and installing cabinets and counters.

6. Furniture: $15,000 to $30,000

You must purchase furniture such as tables, chairs, and office furniture from an Approved Supplier that meets the franchisor’s Standards.

7. Menu Board, Graphics, and Interior Signage: $12,000 to $22,600

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This estimate includes the cost of digital and/or static menu boards and interior signage. The cost will vary based on the size of your Restaurant.

8. Exterior Signage: $17,370 to $40,000

The cost of your exterior sign will vary depending on whether you have a drive-thru as well as the size, color, quantity, and back-lite channel letters of the sign and other specifications as the franchisor requires. Freestanding locations may require substantially more signage and cost substantially more than the range provided.

9. Computer System: $26,000 to $60,000

You must purchase, lease and/or license, and install at the Restaurant the POS System, computer systems, mobile hardware, software, online ordering platform, associated computer hardware, telephone lines, network connections, communications equipment, high-speed internet access (e.g. DSL or cable), credit card, gift card and loyalty card processing equipment, and other equipment that the franchisor requires from time to time (collectively, the “Computer System”).

You are required to purchase training software from a vendor that the franchisor designates.

10. Smallwares: $6,700 to $7,500

This estimate includes the cost of purchasing cooking utensils and supplies, cleaning supplies, other smallwares, and other tools necessary to operate the Restaurant.

11. TV/Music: $2,000 to $3,000

The franchisor may require you to install televisions and audio equipment in the Restaurant and to enter into subscriptions for television and audio services.

12. Architect/Engineer: $5,000 to $50,000

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You must engage licensed architects and engineers (for mechanical, electrical, plumbing, and structural) to draft standard construction plans for your Restaurant. Your costs will vary depending upon the location of the Restaurant, its condition, and the need for additional designs, plans, and drawings, if applicable.

13. Rent: $5,000 to $10,000

The figures in the table reflect the franchisor’s estimates for leasing the Restaurant premises and include only one month of rent.

Restaurants are typically locations with a drive-thru in suburban shopping centers but also may be located in non-traditional locations.

The franchisor currently has three traditional prototypes – a 1,000 square foot freestanding location, a 1,800 square foot freestanding location, and a 2,100 to 3,600 square foot endcap or inline location. The franchisor can adapt the prototypes to provide for a variety of restaurant designs of varying square footage.

For a Restaurant at an endcap or inline location, the franchisor estimates that annual rent will typically range between $28 to $34 per square foot, including pass-through costs such as common area maintenance, real estate taxes, and property insurance.

The table estimates the cost to lease real estate. If you choose to instead purchase the land and building for the Restaurant, the franchisor estimates that you could pay about $10,000 to $20,000 per month in monthly mortgage payments.

14. Grand Opening Marketing: $15,000 to $25,000

You must conduct a grand opening advertising campaign with the opening of your Restaurant. You must pay all costs of the grand opening, including publicity costs, promotional costs, plus the full cost of any price reductions or other customer inducements.

Costs may vary depending on your market and the type of advertising used, however, you must spend a minimum of $15,000 ($25,000 if your Restaurant is the first Restaurant to open in a Designated Market Area) during the period beginning four weeks before and ending eight weeks after the opening of your Restaurant.

15. Legal and Accounting Fees: $3,000 to $12,000

This estimate includes the cost of legal and accounting fees that you may incur in establishing your business. Such expenses may include fees payable to attorneys and accountants that you will need to use for the review of the Disclosure Document and the related agreements, as well as for entity formation and lease negotiation.

16. Insurance: $8,000 to $15,000

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, workers’ compensation, employment practices liability, cyber liability, and (if you serve alcohol) dram shop liability insurance.

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

17. Miscellaneous Opening Costs/Office Supplies: $500 to $5,000

This includes office supplies and other miscellaneous opening expenses, such as utility costs, business licenses and permits, opening assistance, and the cost of training your employees.

If the franchisor requires or authorizes you to sell alcoholic beverages, you should be aware that the cost of a liquor license will vary widely depending on the requirements of your jurisdiction and therefore the franchisor has not included estimates for a liquor license. You could spend from $500 to $100,000 to obtain a liquor license depending on your jurisdiction.

18. Security Deposits: $7,000 to $10,000

This estimate includes the cost of deposit expenses to obtain utility services, which includes deposits to initiate telephone, gas, electricity, water, and other services. This estimate does not include any security deposit under any lease for the Restaurant.

19. Training Fees: $0 to $7,080

For the Subsequent Restaurants, you must pay the Management Training Fee if the franchisor requires, or you elect, to receive such training from the franchisor or its designee.

If you have a Certified Training Manager and a Certified Training Restaurant, the franchisor may authorize you to provide the Management Training Program to your trainees.

You will not pay the Management Training Fee for the Initial Restaurants and any training that you provide.

In addition, for your fourth or subsequent Restaurants (including Restaurants owned by your affiliates), you must pay the On-Site Training and Assistance Fee if the franchisor requires, or you elect, to receive on-site training and assistance.

The high estimate includes the cost of one of the franchisor’s trainers traveling to provide one week of such on-site training and assistance.

20. Travel and Living Expenses During Training: $10,000 to $40,000

This estimate is for the cost of two to four people to attend the Management Training Program in an approved training restaurant in a location that the franchisor designates. You are responsible for the travel and living expenses, wages, and other expenses incurred by your trainees during the program.

Your actual cost will depend on your point of origin, method of travel, class of accommodations, and dining choices. If any of your trainees require additional training beyond the franchisor’s standard Management Training Program, you may incur additional costs that are not reflected in this estimate.

21. Opening Inventory: $7,500 to $25,000

You must purchase an opening inventory of food and paper products, which will vary in cost based on the size, location, and projected sales of your Restaurant.

22. Cinnabon Express Bakery Initial Franchise Fee: $8,000

23. Cinnabon Express Bakery: $23,600 to $40,100

These figures represent the estimated initial investment necessary for a Cinnabon Express Bakery as detailed in the Cinnabon Disclosure Document prepared by Cinnabon. These figures are based on Cinnabon’s experience.

Most Restaurants are required to have a Cinnabon Express Bakery, but if the franchisor does not require a Cinnabon Express Bakery for your format (the franchisor does not require it for 1,000 square foot freestanding Restaurants and certain non-traditional locations), then these expenses would not apply to your Restaurant.

24. Additional Funds for 3 Months: $39,000 to $48,000

This estimates the additional funds you may need to cover expenses you will incur before your Restaurant opens and in its first three months of operation.

These expenses may include, without limitation, employee salaries, wages and benefits, payroll taxes (including payroll to cover the pre-opening training period for your staff), Royalty Fees, Advertising Contributions, additional advertising expenses, additional inventory, miscellaneous supplies and equipment, rent, bank charges, state tax and license fees, deposits, prepaid expenses, and other miscellaneous items.

25. Total Initial Investment: $522,570 to $1,146,780