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Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Sizzler Franchise Costs (2015 FDD)

by Franchise Chatter on December 8, 2015

in Casual-Dining Restaurant Franchise, Franchise Costs, Restaurant Franchise

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Detailed Estimates of Sizzler Franchise Costs Based on Item 7 (Estimated Initial Investment) of Sizzler’s 2015 Franchise Disclosure Document

For Free Standing Locations

Hard Costs Related to Construction

1.  Free Standing Building Improvements:  $825,000 to $1,200,000

  • The minimum square footage for a free standing location generally is 5,500 or more square feet. Accordingly, the ranges in the table for free standing locations pertain only to Restaurants ranging from approximately 5,500 to 6,000 square feet with a seating capacity of approximately 180 to 225 people.
  • The range includes an estimate for the cost of building the Restaurant’s structure. If you choose to build and own the Restaurant premises as a free standing location, the cost for your long-term real property investment obligations will be significantly higher and may range between $700,000 to $1,200,000 or more.
  • This estimate does not include land cost.
  • The low figure represents the low end estimate to establish a 5,500 square foot Restaurant, and the high figure represents the high end estimate to establish a Restaurant with 6,000 or more square feet.

2.  Furniture, Fixtures, and Equipment:  $496,000 to $549,000

  • The manuals list the furniture, fixtures, and equipment necessary for the operation of a Restaurant and include refrigerators, freezers, ovens, point-of-sale system requirements, tables, chairs, and other equipment, furniture, and fixtures.

3.  Signage:  $30,000 to $45,000

4.  Computer POS System:  $20,000 to $30,000

5.  Subtotal of Hard Costs Related to Construction:  $1,371,000 to $1,824,000

Other Expenditures

1.  Initial Franchise Fee:  $35,000

  • The amount included in the chart is for your first Restaurant.

2.  Rent:  Amount Not Specified

  • The estimate is for your rent the first three months and does not include an estimate of monthly operating expenses.

3.  Lease and Utility Security Deposits:  $27,500 to $55,000

  • A typical utility security deposit is one month’s expense, but it may be less. A typical lease deposit will be an amount equal to one month’s rent.
  • These estimates may be significantly higher in some jurisdictions.

4.  Fees Related to Site Approval and Construction of Your Restaurant:  $25,000 to $75,000

  • The franchisor must accept the site selected by you. Prior to granting its acceptance of a site, the franchisor may require you to evaluate the site with a specific software application, which may be available from only one specific vendor. You may be required to pay a fee to access any specific software application.
  • You must use the services of a licensed architect and general contractor for the construction of the Restaurant; provided that the architect and general contractor must meet the franchisor’s minimum standards (as stated in the Manuals) prior to you engaging either or both in connection with the Restaurant.

5.  Initial Inventory:  $20,000 to $25,000

  • Your initial inventory must be purchased from approved suppliers, or in accordance with the franchisor’s specifications. Initial inventory consists of various food products, beverages, paper products, cleaning supplies, and other supplies used in the operation of the Restaurant, as well as other merchandise or products sold by the Restaurant.

6.  Insurance:  $3,750 to $6,250

  • The estimate is for approximately 25% of an annual premium and includes liquor liability coverage. The balance of the annual premium is generally payable over a 9-month period.
  • The estimate also includes a non-refundable annual payment for umbrella liability coverage.

7.  Training:  $95,000 to $100,000

  • You must make arrangements and pay the expenses for you, your Operating Principal, the Unit General Manager, and at least two assistant managers to attend the franchisor’s training program, including transportation, lodging, meals, and wages.
  • The estimate provided contemplates initial training of 5 people for 11 weeks.
  • These figures do not include management salaries while in training, but do include additional employment fees for employee advertising/recruitment and uniforms.
  • In addition, if this is your first Restaurant, your Operating Principal must, at your expense, attend a pre-opening training class of approximately 5 days designed to expose your Operating Principal to the process of opening a new Sizzler Restaurant. The training will be held at a Sizzler Restaurant being opened, either by another franchisee or by one of the franchisor’s affiliates.

8.  Reimbursement of Expenses for Hourly Training Team:  $43,000 to $55,000

  • If this is your first Sizzler Restaurant, the Hourly Training Team will assist you with the on-site training of your hourly staff in restaurant operations. You should anticipate spending between $43,000 to $55,000 to complete the necessary hourly staff training.
  • Until you have a sufficient number of trainers on staff (when opening your second or subsequent Restaurant), a portion of this overall expense may be payable to the franchisor with the remainder payable to your own employees (that is, your certified trainers).

9.  Grand Opening Advertising/Marketing:  $12,500

  • These amounts must be spent some time within 45 days prior and 45 days following the opening of your Restaurant, unless otherwise approved by the franchisor.
  • Although the franchisor currently does not do so, it reserves the right to collect and administer these funds on your behalf.

10.  Office Equipment and Supplies:  $5,000 to $10,000

  • Before beginning operations, you must purchase an assortment of office equipment and supplies as prescribed in the manuals. Items include telephones and a facsimile machine.

11.  Liquor License:  $2,000 to $50,000

  • It is your sole responsibility to obtain and maintain a liquor license for your Restaurant. The costs 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.

12.  Professional Fees:  $20,000 to $70,000

13.  Additional Funds (3-month period):  $250,000 to $290,000

  • This amount of working capital is projected as sufficient to cover initial operating expenses, including management salaries, for a period of 3 months.
  • Expenses not included are hourly labor costs, food and product costs, and rent.
  • At the time of opening, you must have a minimum of $100,000 in immediately accessible working capital funds to be used solely to defray the costs of operating the Restaurant for the initial months.

14.  Subtotal of Other:  $538,750 to $783,750

15.  Total:  $1,909,750 to $2,607,750 (not including land)

  • The franchisor has used its and its predecessors’ experience in the business since 1968 to compile these estimates.
  • For determining your initial cash position, the franchisor requires you to have a minimum liquidity of $750,000 with a $3 million net worth.

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