Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Nathan’s Famous Franchise Costs (2016 FDD)

by Franchise Chatter on October 27, 2015

in Franchise Costs, Hot Dog Franchise

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Nathan's Famous Photo by braesikalla

This post was updated on February 24, 2017 to reflect information from Nathan’s Famous’s 2016 FDD (Item 7).

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

Free-standing Restaurant

1.  Initial Franchise Fee:  $30,000

  • If you have signed a Deposit Agreement, Nathan’s will credit any deposit paid to it under the Deposit Agreement against your Initial Franchise Fee.
  • Under the Deposit Agreement, if you are unable or decide not to proceed with your purchase of the franchise 180 days after the effective date of the Deposit Agreement (and before signing a Franchise Agreement), Nathan’s will refund your deposit, minus its reasonable expenses, upon your written request.

2.  Real Estate Rent:  $53,333 to $113,750

  • For a full-size restaurant of between 2,000 to 3,000 square feet, Nathan’s estimates that you will need approximately 25,000 to 35,000 square feet of land to accommodate a prototype free-standing building, including adequate parking.
  • The estimate in the chart assumes that the building itself is leased at an annual rate between $40 and $65 per square foot.
  • The estimate provided in the chart is for eight months of payments:  a one-month security deposit, the last month’s rent, two months’ rent before opening, and three months after opening.

3.  Restaurant Construction:  $175,000 to $450,000

  • If you elect to build your own premises, the estimated amount includes the estimated cost of constructing the Restaurant, if applicable.
  • The figure given in the chart does not include the cost of land.

4.  Site Preparation:  $25,000 to $170,000

  • Site preparation costs include improvements to the land necessary for Restaurant construction and operation, as well as adjacent parking areas.
  • If you construct a free-standing building, you will likely incur this expense. Other formats for the Restaurant probably will not require this expenditure.

5.  Furniture, Fixtures, and Equipment:  $115,000 to $185,000

  • You must purchase or lease certain items of equipment in order to open and operate the Restaurant. The cost will vary depending on the Restaurant’s size and location.

6.  Pre-Opening and Inventory Expenses:  $10,000 to $15,000

  • You must buy enough inventory to open and operate the Restaurant according to Nathan’s specifications.

7.  Training Expenses:  $510 to $9,360

  • You will incur expenses associated with Nathan’s initial training program. Although Nathan’s provides and pays for instructors and instructional materials, you must pay for transportation, lodging, food, and wages for you and your employees.

8.  Insurance:  $5,000 to $7,500

  • You must obtain and maintain the types and amounts of insurance described in the Franchise Agreement.
  • The amount in the chart represents pre-opening expenses. In rare circumstances, you may need to pay the entire annual premium initially.

9.  Security Deposits:  $0

  • Security deposits paid to landlords are included in the line-item for “real estate.”

10.  Utility Deposits:  $2,500 to $6,500

  • The amount of the deposits will vary depending upon where the Restaurant will be located and the practices of the utility companies and lessor. These deposits may be refundable.

11.  Professional Fees:  $12,000 to $25,000

  • You may need to employ an attorney, accountant, architect, and other consultants.

12.  Business Licenses:  $100 to $750

  • Local, municipal, county, and state regulations vary on what licenses and permits are required by you to operate a Restaurant. These fees are paid to governmental authorities before commencing business.

13.  Additional Funds (for first three months):  $10,000 to $25,000

  • You will need to support ongoing expenses, such as payroll and utilities, to the extent these costs are not covered by sales revenue.

14.  Grand Opening Advertising:  $2,500

  • You will be required to conduct, at your expense, a Grand Opening Advertising Program.
  • The cost of this Grand Opening Advertising Program will be credited against your required contribution to the Marketing Development Fund, and is included in the estimate for start-up funds.

15.  Total:  $440,943 to $1,040,360

  • Nathan’s has relied upon its collective experience in the food-service industry when preparing these estimated figures, including the amount of additional funds needed.

Total Estimated Initial Investment Range for Other Restaurant Formats

  • Food Court or In-Line Unit:  $276,360 to $659,610
  • Kiosk (without optional preparation area):  $86,092 to $190,500
  • Kiosk (with optional preparation area):  $98,792 to $248,835
  • Mobile Unit:  $82,200 to $264,100

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