Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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

by Franchise Chatter on September 6, 2015

in Chicken Franchises, Franchise Costs

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KFC Photo by James

This post was updated on May 10, 2017 to reflect information from KFC’s 2017 FDD (Item 7).

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

1.  Application and Background Check Fee:  $300 to $500 per person

  • The application and background check fee is only payable if you are a new KFC franchisee. This fee may be higher for non-U.S. citizens.

2.  Deposit Fee:  $20,000

  • The deposit fee is refundable if KFC does not accept your proposed site.

3.  Option Fee:  $25,000

  • The option fee is refundable under limited circumstances as described in Item 5.

4.  Training Expenses:  $7,000 to $10,000

  • Of the training expenses listed in this column, $3,000 may be paid to KFC or its affiliate if KFC provides you with the restaurant portion of its training program in a Company-Owned Outlet.
  • If you do not conduct any training at a Company-Owned Outlet, you will pay third parties for KFC’s training program. The costs vary depending on how much it costs the third party to train you.
  • KFC’s estimation of your food, lodging, and other expenses you incur in attending KFC’s training program is $3,000 per person.

5.  Permits, Licenses, and Security Deposits:  $50,000 to $100,000

  • You must obtain permits from various local regulatory agencies which may charge a fee for the permits. KFC assumes that you will need to provide deposits for utilities. The amount will vary depending upon the practices of the utility companies.

6.  Real Property:  $400,000 to $1,100,000

  • Average lots for approved, free-standing and in-line Outlet sites are approximately 175 feet wide and 200 feet deep; are on a well-traveled, major street with good ingress/egress; have good visibility; and have ample space for parking, among other things.
  • The estimates given are for purchased sites.

7.  Building and Site Costs:  $534,000 to $745,000

  • The building and site construction estimates are based on the National Average construction cost index (RS Means, city cost index). You will need to adjust your projected costs based on the construction cost index for the location where you plan to build.
  • Local codes may also require some building enhancements which can impact total input cost.
  • Site work costs include those costs necessary to prepare the land for building construction.
  • The costs reflected in Item 7 assume a 20,000 to 35,000 square foot site and they will vary with the size and condition of the site, as well as other factors.

8.  Equipment, Signage, Decor, POS, and MERIT:  $352,000 to $476,000

  • You must install, among other things, restaurant equipment (including cookers; refrigeration; display/holding cabinets, including extended hold cabinets; warmers; and ovens); furniture; decor items; counters; cash registers; the KFCC MERIT system; smallwares; drive-thru timers; and indoor and outdoor signage.

9.  Start-Up Inventory:  $10,000

  • KFC estimates that this fee will be sufficient to cover initial supplies of food and beverage products, as well as packaging and other general supplies, such as cleaning and office materials.

10.  Grand Opening Expense:  $5,000

  • Before opening the Outlet, your initial advertising may include print and electronic media, as well as in-store promotional items such as point-of-sale displays and merchandising materials.
  • The amount of initial advertising will vary depending upon the market.
  • This estimate includes marketing materials, including a grand opening package, you may purchase through One System Program (as defined in Item 11).

11.  Insurance:  $7,250 to $10,050

  • The estimated range consists of the annual insurance premium you will be charged to meet KFC’s minimum insurance requirements for the Outlet.

12.  Miscellaneous Costs:  $5,000 to $10,000

  • These estimated costs consist of such items as uniforms, insurance, and professional fees (for example, attorneys and accountants).

13.  Additional Funds:  $50,000 to $75,000

  • You will need capital to support on-going expenses such as payroll; utilities; royalties; advertising; supplies; food and beverage products; and packaging, to the extent that these costs are not covered by sales revenue.
  • KFC estimates that the listed amounts will be sufficient to cover on-going expenses for the start-up phase of the business, which it calculates to be 3 months.
  • This is only an estimate, however, and there is no assurance that additional working capital will not be necessary during this start-up phase or after.

14.  Total Estimated Expenditure:  $1,465,550 to $2,586,550

  • KFC relied upon its, its parent’s, and its affiliate’s experience in compiling these estimates.

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