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Franchise Costs: Detailed Estimates of Great Harvest Bread Company Franchise Costs (2017 FDD)

by Franchise Chatter on October 20, 2015

in Bakery Franchise, Franchise Costs

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Great Harvest Bread Company Photo by jhofker

This post was updated on October 9, 2017 to reflect information from Great Harvest Bread Company’s 2017 FDD.

Detailed Estimates of Great Harvest Bread Company Franchise Costs Based on Item 7 (Estimated Initial Investment) of Great Harvest Bread Company’s 2017 Franchise Disclosure Document

  • The projected initial investment level for a new franchisee (including existing franchisees acquiring additional Bread Company locations) based on the actual low and high costs for the various line-item expenses in the table below incurred by 6 first-time franchisees who opened their first Great Harvest Bread Company operating as a bakery-cafe between January 2012 and December 2016 (and who reported this information to Great Harvest Bread out of 8 first-time franchisees), ranged from $233,592 to $559,762 (when Great Harvest Bread’s most recent initial franchise fee was $38,000).
  • However, the actual total investment level of those 6 first-time franchisees for their 6 Bread Companies operating as a bakery cafe ranged from a low of $334,281 to a high of $521,966, with an average of $423,469.
  • Great Harvest Bread’s initial franchise fee currently is $20,000, $25,000, or $30,000—depending on your Exclusive Territory’s size—rather than $38,000 (not reflecting the financial incentives available in various circumstances). Therefore, Great Harvest Bread has changed the $233,592 to $559,762 range to $215,592 to $551,762.
  • This table does not include your equipment and other costs if you choose to participate in the Peet’s Coffee Program. This program is completely voluntary on your part and offered by an unaffiliated third party (Peet’s) whose products the franchisor has approved for sale from a Great Harvest Bread Company.
  • The program involves selling Peet’s coffee (and tea) products as part of your Bread Company’s overall operation. Great Harvest Bread does not require you to sell Peet’s coffee.
  • Great Harvest Bread estimates the equipment, small wares, and initial inventory cost for the Peet’s Coffee Program to range from $15,000 to $20,000 (plus tax and shipping) depending on your choice of drip coffee and tea equipment and whether you choose to include iced blended drinks.
  • None of this equipment cost is paid to Great Harvest Bread (but you do pay a Continuing Fee and, if applicable, a Marketing Fee on your revenue from coffee and tea sales.) You also might have additional plumbing and electrical costs.

1.  Initial Franchise Fee:  $20,000 to $30,000

2.  Expenses While Training:  $4,352 to $9,307

3.  One Month’s Rent:  $1,500 to $4,805

  • Most Great Harvest Bread franchisees lease their space. The initial monthly lease cost ranged from $1,500 to $4,805 for first-time franchisees who opened between January 2012 and December 2016, depending on the square footage costs in the community.
  • A Bread Company’s premises typically is in a strip center or stand-alone location in a commercial area or downtown area when that area is viable for every day retail.
  • Lease and leasehold improvement costs depend on the condition, location, and size of the premises; the demand for the premises among possible lessees; whether the premises were used for similar operations; the build-out required; and any construction or other allowances the landlord gives you.
  • Your lease costs are an important consideration. You are responsible for this cost for the entire lease term regardless of your Bread Company’s performance and, more often than not, will have personal liability for the lease costs even if you have an entity to own and operate your Bread Company.

4.  Real Estate and Improvements:  $100,796 to $224,078

5.  Equipment:  $83,674 to $161,754

  • Costs vary because necessary equipment is based on estimated sales at the location (determined after the Franchise Agreement is signed). The availability of used equipment also is a factor.
  • One item not readily reflected in the range is the cost of having a mill meet certain manufacturing standards that historically have not applied to that piece of equipment. While Great Harvest Bread is aware of only 2 Bread Companies in its system ever having to satisfy that requirement, it might be required in the future.
  • If you must buy a mill meeting this different manufacturing standard, Great Harvest Bread estimates the incremental cost to be between $5,000 and $20,000 depending on the age and size of the “old” mill to which you are comparing it.
  • If your Bread Company is a non-bread-baking spoke location, your equipment costs might be lower than the costs disclosed in the range because you need not acquire a mill or a large oven for baking bread.

6.  Signs:  $1,797 to $19,091

7.  Prepaid Expenses and Deposits:  $2,524 to $18,220

  • Prepaid expenses and deposits include security deposits, utility deposits, permit costs, insurance premiums, and similar items. Some of these items might be refundable.

8.  Opening Inventory (Ingredients and Supplies):  $12,766 to $25,123

9.  Grand Opening Advertising Costs:  $422 to $10,000

10.  Organizational Costs/Miscellaneous:  $10,538 to $23,514

  • Organizational costs include legal and accounting fees, incorporation costs, and other miscellaneous expenses incurred before opening.

11.  Miscellaneous Start-Up Costs:  $0 to $10,972

  • Miscellaneous start-up costs include city and health permits, wages paid while training, building insurance premiums, self-storage fees, and other miscellaneous expenses.

12.  Additional Funds – 3 Months:  $4,251 to $52,898

  • This item estimates your initial start-up expenses (other than the items identified separately in the table). These expenses include payroll costs but not any draw or salary for you.
  • These figures are estimates, and you might need additional working capital during the first 3 months you operate your Bread Company and for a longer time period afterward.
  • This 3-month period is not intended, and should not be interpreted, to identify a point at which your Bread Company will break even. Great Harvest Bread cannot guarantee when or if your Bread Company will break even.
  • Your costs will depend on how much you follow Great Harvest Bread’s methods and procedures; your management skill, experience, and business acumen; local economic conditions; the local market for your products and services; the prevailing wage rate; competition; and the sales level reached during the initial period.

13.  Total Estimated Start-Up Costs:  $215,592 to $551,762

  • Great Harvest Bread relied on information from 6 first-time franchisees that opened their Great Harvest Bread Companies between January 2012 and December 2016 to compile this Additional Funds estimate (6 of 8 first-time franchisees reported this information).

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