Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Hooters Franchise Costs (2016 FDD)

by Franchise Chatter on August 9, 2015

in Franchise Costs, Restaurant Franchise, Sports Bar Franchise

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Hooters Interipr Photo 4

This post was updated on November 28, 2016 to reflect information from Hooters’ 2016 FDD (Item 7).

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

  • This chart assumes that you have proceeded in a timely manner with site selection and construction, and that you have not had to pay any fee to extend the time for opening your Restaurant.

1.  Initial Franchise Fee:  $75,000

2.  Real Estate Lease Payments:  $7,000 to $50,000

  • Typical Hooters restaurants are free-standing, located in suburban areas, and contain 5,000 to 7,000 square feet of space.

3.  Liquor License:  $5,000 to $150,000

  • The cost of a liquor license can be significantly higher in a few states where the number of licenses is severely restricted or available only from an existing holder.
  • You should retain legal counsel specialized in obtaining and maintaining liquor licenses.

4.  Improvements/Signage:  $1,200,000 to $1,600,000

  • The figures shown include estimated costs of construction using an architect or engineer the franchisor approves to prepare site layout plans and specifications that conform to the franchisor’s requirements, furnishing the franchisor with these materials, obtaining approval of your plans and specifications from the landlord and local building authorities, and employing a qualified representative to supervise construction or remodeling of the Restaurant.

5.  Equipment, Furniture, Fixtures, Supplies, and Smallwares:  $550,000 to $600,000

  • You must acquire all equipment, smallwares, supplies, and fixtures you will need to operate the Restaurant, including cash registers and back office computer hardware and software.
  • You may obtain the necessary equipment, furniture, and fixtures from approved suppliers or other vendors you choose.

6.  Initial Inventory:  $25,000 to $100,000

  • You must stock your Restaurant with an opening inventory of food, beverages, and merchandise. The franchisor will help you plan your initial inventory.

7.  Labor and Training:  $65,000 to $140,000

  • This amount includes all compensation expenses and other expenses you and your employees will incur in attending the management training. These expenses include transportation, lodging, meals, and wages of your attendees.
  • You should anticipate that it will require 17 weeks to train a Director of Operations, 13 weeks to train a General Manager, and 9 weeks to train an entry-level Assistant Manager.
  • This amount also includes amounts you must reimburse the franchisor for the expenses of its front-of-house trainers, back-of-house trainers, and bar trainers.

8.  Initial Advertising:  $10,000 to $50,000

  • You do not have to spend a specific dollar amount on initial advertising or grand opening activities for your Restaurant. In the franchisor’s experience, you will spend the amount shown in the chart on television, radio, print, or billboard advertising for the opening of the Restaurant.

9.  Insurance:  $45,000 to $100,000

  • The amount shown in the chart is the estimated annual premiums for the insurance.

10.  Professional Fees:  $20,000 to $100,000

  • The estimates shown include accountant’s fees for setting up your accounting and bookkeeping systems, and attorneys’ fees for forming your company, reviewing the Franchise Agreement, and negotiating your lease.
  • The low range assumes that you do not have to engage legal counsel to respond to government resistance to the Hooters concept in a particular jurisdiction. The high range assumes you engage legal counsel, and that your legal fees and costs to overcome governmental resistance are $65,000. Your legal fees and costs may be higher.
  • You should investigate the likelihood of governmental resistance before you sign the Franchise Agreement.

11.  Deposits, Licenses, and Other Prepaid Expenses:  $4,500 to $35,000

  • These costs include business licenses, deposits for utilities, deposits for real property leases, prepaid expenses, and other miscellaneous costs you will incur in opening your Restaurant.

12.  Additional Funds – 3 months:  $50,000 to $150,000

  • The figures include payroll costs (but no salary or draw for the owners of the Franchise unless they are acting in the capacity of a Restaurant manager), health insurance costs, and office support services.
  • The range shown assumes that non-food merchandise inventory turns at a rate of 6 to 12 times per year and you replace the entire inventory one time (during the first month of operation) before your cash flow is sufficient to cover your operating expenses and merchandise purchases.

13.  Estimated Total:  $2,056,500 to $3,150,000

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