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

This post was updated on September 26, 2017 to reflect information from Salsaritas’ 2017 FDD (Item 7).

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

1.  Initial Franchise Fee:  $30,000

2.  Initial Rent:  $0 to $8,000

• The rent for the leased premises will vary substantially per location. The initial start-up expenses are estimated to include the first month’s rent paid in advance.

• The amount of space needed for the Franchise is estimated to be approximately 2,200 to 2,700 square feet with a minimum of 30 square feet of frontage if located in a strip or neighborhood shopping center. However, this will vary by location.

• These numbers do not include insurance, taxes, or common area maintenance charges, as these amounts vary substantially from location to location.

3.  Initial Inventory:  $6,000 to $8,000

• The initial inventory consists of food, beverages, paper items, and cleaning products. This estimate is for the first four days of Franchise operations and foods utilized during initial training.

4.  Leasehold Improvements:  $250,000 to $350,000

• Leasehold improvements may include work conducted by a general contractor to supervise the build-out of the Restaurant (plumbing, electrical, mechanical).

• These costs do not reflect any tenant improvement allowance (“TI”), which represents the amount of money that the lessor is willing to spend on your improvements. If you negotiate TI from the lessor, it is possible that your cost of leasehold improvements can be reduced or included in your monthly lease payment.

5.  Signage:  $16,000 to $40,000

• Exterior signage may include open channel neon signs over the Restaurant, a small sign for the Restaurant on the pole sign for the shopping center (if applicable), menu boards, and interior and exterior signs.

• The estimate given reflects the cost range for one to three exterior signs.

6.  Furniture, Fixtures, and Decor:  $57,000 to $92,000

• Furniture, fixtures, and decor include millwork, countertops and flooring fabrication, lighting, chairs, staff uniforms, umbrellas, patio furniture and other decor, as well as point-of-sale and merchandising materials.

7.  Electronics and Computer System:  $5,800 to $15,000

• This estimate includes Oracle POS system, Netsurion PCI compliance firewall management, three-phone VOIP system, back office computer with support monitoring, ISP set up, and initial cabling installation and setup expenses.

• It includes basic security monitoring but does not include optional security measures such as camera systems, temperature monitors, or exterior strobes.

8.  Restaurant Equipment:  $90,000 to $130,000

• The Restaurant equipment will consist of items such as fryers, walk-in coolers, countertops, grills, small wares, a hood system, hot tables, warmers, freezers, sandwich prep units, sinks, shelving, gas charbroilers, glass sneeze screen, etc.

• All equipment must be purchased from approved vendors.

9.  Grand Opening Marketing:  $5,000 to $15,000

• Expenses for the grand opening marketing program (“GOMP”) are payable to vendors and vary depending on the GOMP that you will develop in conjunction with the franchisor.

• These will be expensed over the course of the first 90 days of operation.

10.  Pre-Opening Salaries:  $8,000 to $10,000

• This estimate includes salaries for your Manager and an assistant manager during the initial training and up to 20 employees during opening assistance.

• These estimates assume that the franchisee or its Operating Principal, as applicable, will not be paid a salary during initial training and opening assistance.

11.  Initial Training Expenses:  $4,500 to $10,500

• You will incur travel, food, lodging, and other expenses during initial training for persons sent by you to initial training (generally, the franchisee or the Operating Principal, as applicable, and two individuals with management responsibility over the Restaurant).

12.  Start-Up Supplies:  $1,000 to $1,200

• This includes office supplies and miscellaneous costs.

13.  Insurance Deposit:  $500 to $2,000

• The franchisor estimates that the insurance deposit will be 20% to 25% of the first year’s insurance premium of $2,500 to $5,000, or $500 to $1,250.

• This coverage includes general liability, fire, workers’ compensation, theft, property, and contents.

14.  Business Licenses:  $500 to $5,000

• Several business licenses must be obtained by the franchisee including state and local retail licenses.

• This estimate does not include permits and licenses for alcoholic beverage service because the costs to obtain and maintain such permits and licenses will vary substantially from jurisdiction to jurisdiction.

15.  Utility Deposits:  $500 to $2,000

• Utility deposits include amounts to be deposited with local water, sewer, gas, electric, and telephone companies.

16.  Legal and Accounting Fees:  $1,600 to $3,400

• Legal fees will be paid by you, if appropriate, in order to retain an attorney to help form the legal entity for your business. You will also need to retain an accounting or payroll service to assist in keeping necessary books and records of income and expenses.

17.  Architectural Fees:  $8,000 to $14,000

• Some jurisdictions may require your building plans to be prepared by a local architect before leasehold improvements can be approved.

18.  Additional Funds (for 1 to 3 months):  $10,000 to $35,000

• You will need additional capital to support on-going expenses. This is only an estimate, however, and there is no assurance that additional working capital will not be necessary during the start-up phase.

19.  Total Initial Investment Before Tenant Improvement Allowance:  $494,400 to $771,100

• In preparing these estimated figures, the franchisor relied on the experience of its franchisees that have opened Restaurants, as well as its own investigation of the marketplaces of Mississippi, South Carolina, Tennessee, and North Carolina.

20.  Tenant Improvement Allowance:  -$135,000 to $0

• Tenant Improvement Allowance (“TI”) are negotiated amounts paid by a lessor to the lessee (you) under a lease as compensation for improvements you will make to the lessor’s property.

• This data reflects the experiences of franchisees in 2016 with the “low investment” range reflecting a large TI and the “high investment” range reflecting no TI.

• In the past year, TI monies ranged from $0 to $50 per square foot for traditional locations ranging in size from 2,121 to 2,700 square feet, but there is no guarantee that you will receive TI monies.

• You may elect to not accept TI monies from your lessor since there is generally an inverse relationship between TI monies accepted and the rent-per-square-foot rate. Thus, you
  may desire to seek a reduced continuing rent instead of upfront TI monies.

21.  Total Initial Investment After Tenant Improvement Allowance:  $359,400 to $771,100