Applebee’s Franchise Costs: Estimated Initial Investment (Item 7, 2021 FDD)

• The following table shows the franchisor’s current estimates of the initial investment likely to be required for the development and opening of Applebee’s newest Restaurant prototype.

• The low range of the costs in the table typically reflects the franchisor’s estimate of costs for a 169-seat version of the newest prototype.

• The high range of the costs in the table typically reflects the franchisor’s estimate of costs for a 225-seat version of the newest prototype and also takes into account some add-ons that may increase the investment cost, including enhanced fire alarm systems, pylon signs, and costs relating to expanding the Restaurant to accommodate up to 275 seats.

• The figures in the table reflect the franchisor’s estimate of your initial investment from the time you sign a Development Agreement through approximately 3 months after you open your first Restaurant.

• The total estimated initial investment includes pro-rated costs and expenses related to on-line ordering, wi-fi services, digital products service fee, server tablet maintenance fee, gateway processing fee, Waitlist, campaign/menu training, and training for 3 months.

• The estimates for construction costs are based on the most recent costs or on the expected costs for franchisees’ Restaurants to be opened in 2020.

1.  Initial Organizational and Training Expenses (incorporation, legal and accounting fees, training, site location, and miscellaneous expenses):  $75,000 to $120,000

2.  Purchase of Land:  $300,000 to $2,000,000

• The cost to purchase land varies because of geographic location. If you do not purchase the land and building for the Restaurant, you will need to lease this property, in which case a security deposit may be required.

• Typical annual rents, which vary widely depending on factors like size, location, and condition of the leased premises, may range from 4% to over 8% of the Restaurant’s Gross Sales per year.

• Also, you might incur certain construction or remodeling costs for necessary leasehold improvements.

• Free-standing Restaurant sizes using the newest prototype range from approximately 4,500 square feet (seating 168) to approximately 5,410 square feet (seating 225), and Restaurants located in strip centers, shopping centers, and malls generally require more square footage to achieve the same seating.

3.  Building Costs (purchase, construction, remodeling, etc.):  $556,000 to $2,600,000

4.  Site Work:  $50,000 to $500,000

5.  Professional Services:  $30,000 to $211,000

6.  Permits/Fees:  $1,500 to $75,000

7.  Furniture, Fixtures, Equipment, and Signage:  $410,000 to $750,000

• You may wish to install additional signage which costs approximately $15,000 to $30,000 for a monument sign and $25,000 to $35,000 for a 35-foot pylon sign.

• In addition, if you require a security system and fire alarm, it will cost approximately $25,000 to $30,000. Cost may vary by region, as well as engineering and material costs.

8.  POS System:  $20,000 to $45,000

• You must install the hardware, operating system, and software required to equip the Restaurant with a POS that the franchisor approves. You must have a secured network in place before operating the system.

• Typically, you will use 5 to 7 POS workstations or 3 POS workstations and a sufficient number of server tablets with guest check printers and a kitchen display system (“KDS”) consisting of 4 to 5 displays.

• Server tablets are currently optional but may be required in the future. If they are required in the future, they must be pre-approved by the franchisor. Amounts noted include 8 optional server tablets.

• The franchisor frequently tests new technology and service models for use by franchisees. These technologies may require additional costs for installation and supplies. The new technologies, when implemented, will become part of the System.

9.  Kitchen Display System:  $12,000 to $18,000

• All Restaurants must have a KDS that meets Applebee’s specifications and is approved by it. The KDS approved by Applebee’s is specifically designed for meeting the operational and guest experience requirements of the Applebee’s brand.

• Currently, the approved KDS is provided by QSR Automations. Applebee’s reserves the right to change KDS providers from time to time at its sole discretion. You must at all times use the approved KDS system in your Restaurant.

10.  Smallwares (dishes, silverware, other utensils, etc.):  $25,000 to $35,000

11.  Initial Inventory:  $25,500 to $47,300

12.  Pre-Opening Expenses (insurance, legal, accounting, personnel, and training expenses):  $55,000 to $100,000

13.  Applicant’s Fee:  $0 to $15,000

14.  Franchise Fee Deposit:  $0 to $10,000

15.  Initial Franchise Fee:  $35,000 (if Franchise Fee Deposit paid, then less $10,000, for a total of $25,000)

• When you sign the Development Agreement, you may be required to prepay a portion of the total franchise fees for the Restaurants the franchisor requires you to develop during the initial years of the Development Agreement.

• This amount will vary based on your development obligations during the “initial development periods”. If required, the franchise fee deposit will equal $10,000 per Restaurant.

• Application of a part of the franchise fee deposit reduces the franchise fee. The 2 installments are due as follows:  50% when you sign the Franchise Agreement and the remaining balance 14 days before you are scheduled to open the Restaurant.

16.  Initial Advertising Expense:  $5,000 to $40,000

• You must conduct an advertising campaign to promote the opening of the Restaurant, and the franchisor will reimburse you for 50% of your expenditures for such advertising campaign up to a maximum of $2,500 if you comply with the requirements described in the Franchise Agreement and the Field Marketing Internet.

17.  Liquor License(s):  $500 to $1,000,000

• The amount necessary to obtain a liquor license varies greatly depending on the city, county, and state licensing authority involved and may be based on whether a license is available from the licensing authority or must be purchased from a third party.

18.  Apple Supply Chain Co-Op Stock Purchase:  $0 to $100

• Membership in the Apple Supply Chain Co-op, Inc. (“Apple Co-op”) is voluntary. If you choose to join, this fee must be paid. Payment must be made to Apple Co-op and not to the franchisor.

19.  On-Line Ordering:  $56 to $150 per month

• You must sign an Authorized Operator Agreement with Mobo Systems, Inc. (or another vendor approved by Applebee’s) for access and use of an approved provider’s on-line ordering system in form and substance approved by Applebee’s. These figures include the estimated cost for services provided by Mobo Systems, Inc. and a payment gateway provider related to on-line ordering.

20.  Europay, Mastercard, and Visa (“EMV”) Point-to-Point Encryption (“P2P”) Services:  $1,500 to $3,000

• You must purchase equipment and procure services from an approved payment gateway vendor for credit card processing services. These figures include the estimated cost to purchase the equipment and a monthly fee of $66 to $130.

21.  Wi-Fi Services:  $90 to $400 per month

• You must have a secure Wi-Fi connection in your Restaurant with sufficient bandwidth to support Restaurant operations and guests’ needs. Wi-Fi connection is required in order to utilize Applebee’s University and other technology platforms, including server tablets.

22.  Wi-Fi Equipment:  $300 to $600

• You must make a one-time purchase of commercial Wi-Fi hardware that is approved by the franchisor.

23.  Digital Products Service Fee:  $150 to $350 per month

• Applebee’s currently requires “I’ve Arrived”, where applicable, and it may require other products from time to time in the future, including without limitation, guest payment and ordering from their own device (“Bring Your Own Device” or “Pay ‘N Go”).

• The current fees reflect software as a service pricing but the franchisor may charge you transaction pricing in the future.

24.  Server Tablet Maintenance Fee:  $0 to $1,000 per year

• There is an annual maintenance fee of $1,000 per Restaurant if server tablets are deployed (regardless of the number of tablets in the Restaurant).

• Server tablets are currently optional but may be required in the future. If they are required in the future, they must be pre-approved by the franchisor.

25.  Implementation Fees:  $240 to $450

• These fees relate to deployment and support for hardware and software upgrades, as well as other products.

26.  Menu Management Platform Fee:  $0 to $150 per month

• This fee relates to providing menu management capabilities including integrations to other digital platforms and A1POS. This fee is currently optional but may be required in the future.

27.  Customer Relationship Management (“CRM”) Fee:  $0 to $150 per month

• This fee may be funded by the Applebee’s National Advertising Fund or there could be all or a portion of the fees required to be paid directly by the franchisee.

28.  Gateway Processing Fee:  $66 per month

• This fee covers transaction processing costs to route transactions from the POS to the credit or gift card provider. These fees are in addition to any processing fees charged by your credit card and gift card processors.

29.  Waitlist:  $0 to $69 per month

• Waitlist enables restaurants to seat more guests, more efficiently through a service provided by NoWait or WaitWhile.

• Waitlist is currently optional but may be required by Applebee’s in the future.

30.  ROSnet – Food Cost, Labor, and Business Analytics Reporting Service:  $200 set up per location; $75 to $225 per month (depending on modules selected)

31.  Campaign/Menu Training:  $30 per year

• This training is required.

32.  Training: Applebee’s University (or a future learning management system training program provided by the franchisor) or Your Selected Training Program Approved by the Franchisor:  $120 per year

• This training is required.

33.  Extra Manuals:  $0 to $250 per set

• Payable if you want extra manuals, training materials, and other similar documents. The franchisor makes the first set available to you for free.

34.  Operating Expenses During First Three Months:  $405,000 to $655,000

• This estimates your initial operating expenses for 3 months of operation. These expenses include working capital, payroll costs, food and liquor costs, utilities, ordinary maintenance, local advertising, royalty fees, advertising fees, telecommunication services, Internet, and other expenses normal in operating a Restaurant.

35.  Total:  $2,009,201 to $8,266,730

• The franchisor relied on its experience and the experience of its affiliates and franchisees who provided projected or actual costs of Restaurants to compile this estimate.