Detailed Estimates of Penn Station East Coast Subs Franchise Costs Based on Item 7 (Estimated Initial Investment) of Penn Station East Coast Subs’ 2017 Franchise Disclosure Document
1. Initial Franchise Fee: $25,000
2. Real Property: varies
- You must lease a site for each of your Penn Station Restaurants. Typical locations for a Penn Station Restaurant are in strip shopping centers, business districts, college campuses, busy suburban streets, and comparable commercial areas accessible to the public.
- The typical store should have at least 1,500 square feet, preferably 20′ wide, although Penn Station may consider smaller spaces depending on the circumstances. It does not anticipate approving a store having square footage greater than 1,800 absent special circumstances.
- Penn Station estimates that starting rent (except for regional shopping malls, where rent varies widely and is generally substantially higher) will be between $15 and $30 per square foot of space per month depending on factors such as market conditions, available space, and the location of the premises. Based on leases entered into in 2016, Penn Station believes a realistic rental goal would be between $22 and $30 per square foot.
- You may have to pay rent on the basis of a percentage of your gross sales plus a base rent depending on the landlord’s policies and practices. In addition, security deposits are typically required which are typically 1 or 2 months of rent.
- You may also be responsible under the lease for real estate taxes, maintenance and repair expenses, utilities, construction “back charges,” common area charges, common advertising charges, insurance coverages (including insurance for business interruption of the operation of your Penn Station Restaurant to cover rent payments), and other charges.
- Rent payments usually begin on the first day of the month of operation.
3. Store Construction: $105,671 to $267,224
- Store construction includes plumbing, electrical, hood and HVAC systems, cabinets, interior walls, counter tops, decor, floor and wall covering materials, lights and installation labor, and other interior improvements and decor.
- Some landlords grant to franchisees an allowance for store construction as an inducement to sign a lease. During 2016, the average allowance of the 11 franchisees who received allowances was $39,459, with 2 out of 13 new Restaurants receiving no allowance.
- Penn Station has deducted the average allowance from the store construction cost shown in the table in this Item 7 and in the total cost amount shown below.
4. Equipment: $139,655 to $192,614
- Equipment includes grills, ovens, refrigerators, food storage and preparation equipment (including food preparation tables), fryers, beverage dispensing machines, small wares, signs, food photographs, television, plaques, point-of-sale system, and other operational equipment and trade fixtures used in your Penn Station Restaurant.
5. Opening Inventory: $5,341 to $14,434
- Opening inventory includes meats, produce, cheeses, drinks, bread, paper products, small wares and implements, beverage containers, miscellaneous supplies, and an initial set of uniforms.
6. Security Deposits and Prepaid Expenses: $120 to $18,195
7. Additional Funds for First 3 Months: $10,000 to $25,000
- This amount estimates initial cash start-up expenses and your ordinary recurring cash business expenses per Restaurant opened for a three-month period in addition to the other expense items listed in this Item.
- These sums are approximate amounts that are based solely on information supplied to Penn Station from its franchisees who opened Restaurants in 2016 and who reported to Penn Station additional cash requirements above the available cash flow from their operations.
- These figures are estimates, and Penn Station cannot guarantee that you will not have additional expenses starting the business or if or when the business will break even.
8. Site Advertising for Opening: $0 to $10,000
- Penn Station requires you to spend up to $10,000 for Grand Opening Advertising.
9. Design Fees for Construction: $5,000 to $10,472
10. Legal Fees, Organizational Costs: $0 to $9,907
11. Pre-Opening Interest Cost: $0 to $2,445
- This amount estimates the interest cost on your financing (per Restaurant) before your Penn Station Restaurant opens. This expense was based solely on amounts reported to Penn Station by franchisees who opened Restaurants in 2016. This expense will vary greatly depending on the terms you negotiate with your lender, including the interest rate and the date you must start paying interest.
12. Travel, Room, and Board to Attend Training Program (depending on distance to training facility): $2,315 to $22,712
13. Permits and Licenses: $0 to $1,910
- This amount does not include the cost of any construction-related permits which vary greatly with the building/zoning department of each locality. Construction-related permits are included in the cost of construction.
14. Total: $293,102 to $593,027 (does not include lease expenses, the optional Site Reservation Fee, or the Territory Fee)
- The amounts given in this Item 7 reflect Penn Station’s estimate based on information reported to it by its franchisees. The exact cost will depend on a variety of factors that Penn Station cannot know in advance.
- For Restaurants opened in 2016, the average amount spent for Store Construction and Equipment was $346,093, with 7 stores above the average and 8 stores below the average.