Franchise Costs: Detailed Estimates of PJ’s Coffee of New Orleans Franchise Costs (2018 FDD)

Detailed Estimates of PJ’s Coffee of New Orleans Franchise Costs Based on Item 7 (Estimated Initial Investment) of PJ’s Coffee of New Orleans’ 2018 Franchise Disclosure Document

Full Service

1.  Initial Franchise Fee:  $30,000

2.  Real Estate Lease for Premises:  $7,500 to $25,000

• Locations for PJ’s Units are typically within shopping strip centers and suburban shopping areas.

• Typically, Franchisee would lease an existing location in a shopping strip center or other freestanding building and remodel the location to conform to the current design specifications of Franchisor.

• Franchisee may also lease the land and an existing facility and convert the facility to Franchisee’s PJ’s Unit or enter into a build-to-suit lease under which lease the landlord agrees to construct a structure which is used as Franchisee’s PJ’s Unit and lease the land and the building back to Franchisee.

• Franchisee may also purchase the land and build the facility itself.

• The cost of land may vary dramatically depending upon a multitude of factors and it varies by city and region.

• Franchisor has not included costs for land acquisition or construction of a building.

• For a typical PJ’s Unit, Franchisee must lease approximately 1,000 to 2,200 square feet of space. Lease payments for a typical PJ’s Unit usually range from $1,875 to $6,250 per month depending upon the size, location, and market demand for the property. The rate may be higher for regional mall sites or locations in high demand.

• Franchisor estimates that the range given will cover a deposit and first month’s rent.

3.  Furniture, Fixtures, and Equipment:  $50,000 to $150,000

• Franchisor will provide a complete list of furniture, fixtures, and equipment needs and specifications.

• Franchisor estimates that the range given will also be enough to purchase the initial decor package and other miscellaneous equipment.

• The decor package and equipment must comply exactly with the designer and/or architectural plans specified by Franchisor.

4.  Opening Advertising:  $5,000

5.  Training Expenses:  $–

• Franchisor provides instructors and instructional materials for up to three managers at no cost. However, Franchisee must arrange for Franchisee’s own transportation, lodging, and meals for Franchisee and for any costs incurred by associates.

• Franchisee or Franchisee’s manager must attend approximately five to eight seven days of management training in the Greater Metro New Orleans, Louisiana market.

6.  Travel and Living Expenses While Training:  $3,500 to $7,000

• These costs will depend on the distance Franchisee must travel, the type of accommodations, the number of attendees, and any wages paid by Franchisee to the associates attending training.

• The costs listed include estimates for reasonably priced transportation, lodging, and meals for three people. The costs do not include wages paid for associates or employees attending training, local restaurants, or other attractions in the Greater Metro New Orleans, Louisiana area, which can significantly increase Franchisee’s costs and affect the quality of Franchisee’s training.

7.  Insurance:  $2,400 to $5,000

• Franchisee must procure comprehensive liability, property, and other types of insurance coverage as provided in Franchisee’s Franchise Agreement, Franchisee’s lease, and as may be required by law.

• The estimate given in the chart is for the first year’s premium for a customary comprehensive general liability policy in the amount of $1 million per occurrence, business interruption insurance, and $1 million aggregate with full replacement value of business contents coverage.

• Franchisee also must list New Orleans Brew, LLC as an additional named insured.

8.  Other Prepaid Expenses (such as deposits, licenses, and various permits):  $1,000 to $3,500

• These costs include installation charges and deposits for a business telephone line, utilities, occupational licensing, health, and other permits, and, in some areas, zoning or impact fees.

9.  Opening Inventory:  $9,000 to $12,000

• Franchisor estimates that the range given will be sufficient to cover a supply of food and
  beverages, menus, uniforms, and other supplies for the opening of Franchisee’s PJ’s Unit.

10.  Signage:  $4,000 to $18,000 

11.  Leasehold Improvements:  $50,000 to $200,000

• The cost of the leasehold improvements typically ranges from $50,000 to $270,000 depending upon the requirements of the city and/or state in which Franchisee is building.

• The cost of the improvements will vary depending upon the condition and type of building leased and the willingness of the lessor or owner to contribute to the construction or remodeling of Franchisee’s PJ’s Unit.

• Costs could exceed the estimates if remodeling is extensive and the lessor or owner does not contribute significantly to the costs of remodeling of Franchisee’s PJ’s Unit.

• Franchisor will provide a complete list of improvements and design and decor criteria for Franchisee’s PJ’s Unit.

• Franchisee must use a licensed and insured General Contractor for all construction and remodeling on the interior and exterior of the franchised location.

12.  Smallwares:  $3,000 to $5,000

13.  POS System and Back Office Computer System:  $5,500 to $12,000

14.  Legal, Accounting, and Organizational Costs:  $4,500 to $7,000

15.  Additional Funds:  $27,500

• This amount reflects the minimum suggested amount of additional funds Franchisee will need for the first three months Franchisee operates Franchisee’s PJ’s Unit.

• This amount includes the following items: salaries and wages, payroll taxes, advertising, product purchases, payment of royalties, uniforms, utility bills, ongoing professional fees, freight, and other miscellaneous administrative and operating expenses.

16.  Construction Drawings:  $1,500 to $20,000

• Franchisee must obtain construction drawings and make certain improvements and modifications to the particular building Franchisee leases to conform to the decor and design of other PJ’s Units.

• The cost of the construction drawings typically ranges from $1,500 to $10,000, depending upon the project scope, size of the project, and requirements of the city and/or state in which Franchisee is building.

• The construction drawings fees do not include civil or environmental engineering drawings as these are not typically required for a PJ’s Unit.

• Franchisor may offer the service of preparing pre-construction drawings to aid the preparation of the complete construction drawing set.

• The pre-construction drawings may include existing and proposed floor plan, reflected ceiling plan, equipment and furniture plan, finishes and details, and typical elevations plan.

• The fee for the pre-construction drawings prepared by Franchisor ranges from $500 to $2,500.

17.  Total:  $204,400 to $527,000

• Franchisor relied on its prior experience in this business to compile these estimates.