Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Carl’s Jr. Franchise Costs (2016 FDD)

by Franchise Chatter on February 9, 2017

in Franchise Costs, Hamburger Franchise

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Detailed Estimates of Carl’s Jr. Franchise Costs Based on Item 7 (Estimated Initial Investment) of Carl’s Jr.’s 2016 Franchise Disclosure Document

1.  Initial Franchise Fee:  $15,000 to $35,000

2.  Opening Training Support Team Fee:  $0 to $10,000

3.  Real Property:  Variable

  • Carl’s Jr. expects that you will buy or lease unimproved property and construct the Franchised Restaurant.
  • Typically, 32,000 to 44,000 square feet of land is needed for the Franchised Restaurant and adjacent parking facilities. Local building codes may require that the Franchised Restaurant be placed on a larger lot.
  • The cost of commercial land, whether you lease or buy, may vary considerably depending upon the location and conditions affecting the market for commercial property.
  • The purchase of unimproved property of the size required may range from $650,000 to $1,100,000 or more.
  • The rent for unimproved property may range from $4,000 to $15,000 or more per month, or approximately 10% per year of the fair market or agreed upon land value. You may be required to pay the first and last months’ lease payment upon signing your lease agreement.
  • Lease payments made by you to third party lessors may vary greatly depending on the property size, type of transaction, and location.
  • Lease agreements for the land may include the following expenses:  taxes, insurance, maintenance, fixed rent (with escalations), percentage rent, and other charges related to the operation of the Franchised Restaurant.

4.  Building:  $462,000 to $495,000

  • These figures are for a free-standing building and do include site preparation for the building only.
  • HVAC installation only is included in the building cost.
  • These figures do not include the extra cost for the addition of a cash window in conjunction with a single or double drive-thru lane which would add from $65,000 to $115,000 in costs.

5.  Site Improvements:  $210,000 to $394,000

  • Site costs include all required work to provide fill and compaction, curb cuts, parking lot curbs and gutters, sidewalks, drive-thru lanes, landscaping and irrigation, site electrical and lighting, grease interceptor, and utility runs.

6.  Soft Costs:  $90,000 to $120,000

  • You should check with the relevant regulatory agencies to identify costs for required building permits, impact fees, taxes, bonds, licenses, and other fees, which can vary dramatically depending on the location.
  • There may also be off site costs, such as intersection improvements or street widening that, where required, have a major impact on costs.

7.  Equipment:  $340,000 to $410,000

  • You must purchase certain items of furniture, fixtures, equipment, including point of sale equipment, and smallwares.
  • All items purchased through HED, as discussed in Item 8, must be paid in full. You may be able to lease from or finance through a third party a portion of these purchases, but you should expect to make a down payment of up to 25%.
  • The high end of these figures also includes the cost to install a catalytic converter for the charbroiler. If required, the cost of the catalytic converter is approximately $1,685.

8.  Signage:  $50,000 to $110,000

  • The type of signage installed is governed by local ordinances regarding height and size restrictions.
  • The typical sign package includes exterior building signs and a twenty-five foot tall pole or monument sign.
  • A typical unit with a drive-thru has 2-4 illuminated directional signs.

9.  Point of Sale System:  $20,000 to $45,000

10.  Initial Training:  $20,000 to $60,000

  • In addition to any Training Fees, you must pay the costs of transportation, lodging, and food for yourself and your employees during training. The amount of these expenses will depend on the distance you must travel, type of accommodations, the number of your employees attending training, and their wages.

11.  Pre-Opening Costs:  $8,000 to $23,000

  • These costs include uniforms, office supplies, and other prepaid expenses. This range also includes $6,000 to $19,000 for the initial inventory of food and paper for a Carl’s Jr. Restaurant.
  • These costs do not include utility deposits, installation of telephones, business licenses, or cleaning supplies, which are not substantial.
  • Carl’s Jr. will reimburse you up to $5,000 for grand opening advertising expenditures that you make during the period from 30 days before the Franchised Restaurant opens until 90 days after opening.
  • Those expenditures must be pre-approved by Carl’s Jr. and comply with the requirements in the Franchise Agreement for local advertising, and you must provide written proof to Carl’s Jr. of the advertising and the cost for that advertising no later than 120 days after the Franchised Restaurant opens.

12.  Additional Funds for 3 Months:  $160,000 to $250,000

  • These figures are an estimate of your operating expenses for the initial 3 months of business. They include payroll, taxes, insurance, food, paper, supplies, utilities, licenses and permits, bank charges, and repair and maintenance expenses. They do not include advertising or royalty payments made to Carl’s Jr.
  • These figures are estimates, and Carl’s Jr. cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on factors such as:  the size of your Franchised Restaurant; how closely you follow Carl’s Jr.’s methods and procedures; your management skill, experience, and business acumen; financing costs; local economic conditions; the local market for restaurants; the prevailing wage rate; competition; and the sales level reached during the initial period.

13.  Total Estimated Initial Investment:  $1,375,000 to $1,952,000 (does not include real estate costs)

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