Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Burger 21 Franchise Costs (2015 FDD)

by Franchise Chatter on January 21, 2016

in Franchise Costs, Hamburger Franchise

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Burger 21's OMG Burger

Detailed Estimates of Burger 21 Franchise Costs Based on Item 7 (Estimated Initial Investment) of Burger 21’s 2015 Franchise Disclosure Document

1.  Initial Franchise Fee:  $27,000 to $40,000

  • The initial franchise fee varies depending on the number of Restaurants you agree to develop as follows:
  • 1 to 3:  $40,000
  • 4 to 6:  $35,000
  • 7 or more:  $30,000
  • There are also the Special Discounts of a 10% reduction for the VetFran and DiversityFran Programs. The Special Discounts cannot be combined.

2.  Leasehold Improvements:  $131,000 to $420,212

  • The Restaurant typically will be located at a Site located within a regional or lifestyle mall or strip/shopping center that is close to retail or other commercial area. These estimates assume that the Restaurant is located in a retail shopping center or mall.
  • The average size of a Restaurant is between 2,200 and 3,000 square feet. The franchisor estimates that the rental range would be approximately $35 to $50 per square foot plus Triple Net charges.
  • These costs also include architectural drawings. Some Restaurants may also have to pay government imposed impact and permit fees depending on the site.
  • The initial investment assumes you will rent.
  • The low estimate assumes that your Restaurant will be located in an existing restaurant space with certain equipment and infrastructure that can be repurposed to suit your needs.
  • If you lease your Site, you may be able to negotiate an allowance to cover a portion of these build-out and leasehold improvements. The franchisor estimates that the average allowance is from $0 to $350,000. A landlord allowance would reduce the estimated cost that you could expect to incur for leasehold improvements.

3.  Impact Fees:  $0 to $32,775

  • Impact fees can be a part of doing business in some municipalities. A municipality may charge impact fees to support infrastructure for water, sewage, and transportation.

4.  Furniture, Fixtures, and Equipment:  $111,052 to $249,077

  • This item may include tables and booths, sinks, refrigerators, ovens, ventilation systems, display cases, stools, chairs, utensils, a phone system, a security system, a CCTV system, a desk, filing cabinets, and related office supplies for a Restaurant.
  • The low estimate assumes that your Restaurant will be located in an existing restaurant space with certain equipment and infrastructure that can be repurposed to suit your needs.

5.  Computer and Point-of-Sale Hardware; POS Software (3 months); Digital Display Board:  $20,713 to $31,238

  • The franchisor currently requires you to purchase the CBS Northstar POS System and a personal computer with an HP or Canon inkjet or laser printer.

6.  Computer Software (Installation, Training, and 1st Year Subscription), including Firewall:  $5,175 to $5,975

  • You must subscribe to Syrus, a back-office restaurant management software system from Syrus, Ltd., or any future system that the franchisor prescribes.
  • You must also use FusionPrep, a digital kitchen solution, in the operation of the Restaurant.

7.  Gift Card Processing (3 months):  $15 to $90

  • The franchisor currently requires you to utilize a designated third party vendor for gift card processing. Gift card processing is currently $4.95 to $29.95 per month (flat fee), with $0 per transaction.

8.  Customer Surveys (3 months):  $210

  • The franchisor currently requires you to utilize designated customer survey services provided by third parties that bill the franchisor collectively for all Restaurant locations.

9.  Music Channel (Initial Set-Up and 3 Months):  $283

  • The cost of the required music channel is currently an initial set-up fee of $199 plus $28 per month. These fees are determined by the service providers.

10.  Signage:  $5,725 to $25,073

  • If local laws permit, you must display a curb or marquee sign that complies with the franchisor’s specifications and standards.

11.  3 Months’ Rent:  $17,322 to $37,500

12.  Security Deposit:  $0 to $12,500

  • The franchisor estimates that the security deposit will equal one month’s rent.

13.  Opening Inventory and Supplies/Smallwares:  $22,132 to $28,316

  • You must purchase an opening inventory of supplies, which includes smallwares, paper goods, and in-store retail merchandise as described in the Manual.

14.  Grand Opening Advertising:  $10,000 to $15,000

  • You must conduct a grand opening advertising and promotional program for the period from when the certificate of occupancy for your Restaurant is issued and up to 90 days post opening.

15.  Wages, Travel, and Living Expenses During Initial Training and Line Cook Training:  $22,620 to $52,820

  • The franchisor provides initial training to you and up to 4 other persons (or up to 5 of your owners and managers if you are a business entity) without charge, but you are responsible for all compensation, travel, lodging, and living expenses which such persons incur in connection with the initial training.

16.  Opening Costs and Training:  $22,000 to $37,000

  • This item estimates the initial food and beverage inventory, initial wages, and food and beverage expenses for the staff and managers during the pre-opening training period as well as initial training materials, and includes the $200 for attending the Food Protection Manager Course and the Alcohol Course.
  • Also included in this item are the wages for managers for the period after initial training in Tampa, Florida prior to pre-opening training.

17.  Working Capital/Additional Funds (3 months):  $25,000 to $70,000

  • This estimate includes payroll for your General Manager, Front of the House Manager, Kitchen Manager, Assistant Kitchen Manager, and restaurant staff. Additional funds also include loan origination fees, loan closing fees, potential SBA loan guarantees, and other various costs.
  • These figures are estimates, and the franchisor cannot guarantee that you will not have additional expenses starting the business.

18.  Insurance (3 months):  $3,000 to $6,800

  • The franchisor is establishing the minimums but it urges you to consult with your own insurance carrier for higher amounts or additional coverage.

19.  Legal and Accounting Expenses:  $2,500 to $6,000

  • These fees are representative of the costs for engagement of professionals for the start-up of a franchised business.

20.  Permits and Licenses:  $2,500 to $14,295

  • Includes expenses incurred to obtain business licenses, building permits, and a beer and wine license. In some areas, the cost of a beer and wine license can be substantially higher.

21.  Total Estimated Initial Investment (Unit Franchise) (Excluding Real Estate Purchase Costs):  $428,247 to $1,085,164

  • The franchisor relied on its affiliates’ experience from opening 4 Burger 21 Restaurants in the Tampa Bay, Florida area and the experience of 11 franchisees opening Burger 21 Restaurants in Arizona, Florida, New Jersey, Georgia, New York, North Carolina, and Virginia, as well as its experience in the restaurant business, to compile these estimates.

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