Capriotti’s Franchise: Average Sales ($920K) vs. Cost ($417K-$748K)

In this exclusive Franchise Chatter FDD Talk post, you’ll learn the following:

Section I – Estimated initial investment (franchise costs) for a Capriotti’s franchise, based on Item 7 of the company’s 2023 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Capriotti’s franchise, based on Items 5 and 6 of the company’s 2023 FDD

Section III – Number of franchised and company-owned Capriotti’s outlets at the start of the year and the end of the year for 2020, 2021, and 2022, based on Item 20 of the company’s 2023 FDD

Section IV – News updates on the Capriotti’s franchise opportunity

Section V – Presentation and analysis of Capriotti’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2023 FDD, including information on the:

• 2022 average, median, highest, and lowest unit volume for all franchised Capriotti’s Restaurants open during all of 2022, all franchised Capriotti’s Restaurants in “mature markets” as of December 31, 2022, all franchised Capriotti’s Restaurants open more than 2 years as of December 31, 2022, and all franchised Capriotti’s Restaurants open more than 10 years as of December 31, 2022, respectively

• 2022 average, median, highest, and lowest unit volume for all affiliate-owned Capriotti’s Restaurants open during all of 2022, all affiliate-owned Capriotti’s Restaurants in “mature markets” as of December 31, 2022, all affiliate-owned Capriotti’s Restaurants open more than 2 years as of December 31, 2022, and all affiliate-owned Capriotti’s Restaurants open more than 10 years as of December 31, 2022, respectively

• 2022 average and median total sales, prime cost, cost of goods sold, store level salary, store level bonus – salary, payroll and related expenses, operating expense, non-controllable expense, rent, royalty fee, national marketing fees, local marketing cooperative fees, and EBITDA for the 10 affiliate-owned Capriotti’s Restaurants in the State of Nevada that operated during all of 2022

Section VI – Key ratios, comparables, computations, and analyses for the Capriotti’s franchise opportunity (exclusive content for Platinum subscribers)

Section I – Capriotti’s Franchise Costs

• Capriotti’s franchise costs, based on Item 7 of the company’s 2023 FDD:

• Franchise Fee:  $40,000
• Development Services Fee:  $10,000
• Architectural/Engineering Fees and Project Management:  $15,000 to $32,500
• Professional Services:  $2,000 to $8,000
• Permits and Licensing:  $3,000 to $17,000
• Rent:  amount not specified
• Security Deposits:  $3,100 to $15,000
• Leasehold Improvements:  $142,000 to $290,000
• Furniture, Fixtures, Equipment, and Smallwares:  $100,000 to $175,000
• Interior Décor:  $4,000 to $13,000
• Exterior Signage:  $5,000 to $21,000
• Menu Boards:  $800 to $2,000
• POS System:  $6,200 to $20,000
• Training:  $15,000
• Opening Inventory:  $7,000 to $15,000
• Shop Launch Marketing Plan:  $30,000
• Pre-Opening Mock Operations:  $3,000
• Insurance (3 months):  $1,000 to $2,000
• Additional Funds (3 months):  $30,000 to $40,000
• Total Estimated Capriotti’s Franchise Costs (excluding real estate purchase and lease costs):  $417,100 to $748,500

Section II – Capriotti’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Capriotti’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2023 FDD:

• Initial Franchise Fee:  $40,000
• Royalty Fee:  6% to 7% of monthly Gross Sales
• Marketing Fund:  up to 4% of monthly Gross Sales. Capriotti’s currently charges 2% of monthly Gross Sales.
• Cooperative Advertising:  up to 2% of monthly Gross Sales. Capriotti’s currently requires you to contribute the full 2%.

Section III – Number of Franchised and Company-Owned Capriotti’s Outlets

Franchised

2020

• Outlets at the Start of the Year:  92
• Outlets at the End of the Year:  100
• Net Change:  +8

2021

• Outlets at the Start of the Year:  100
• Outlets at the End of the Year:  110
• Net Change:  +10

2022

• Outlets at the Start of the Year:  110
• Outlets at the End of the Year:  135
• Net Change:  +25

Company-Owned

2020

• Outlets at the Start of the Year:  13
• Outlets at the End of the Year:  15
• Net Change:  +2

2021

• Outlets at the Start of the Year:  15
• Outlets at the End of the Year:  14
• Net Change:  -1

2022

• Outlets at the Start of the Year:  14
• Outlets at the End of the Year:  10
• Net Change:  -4

Section IV – News Updates on the Capriotti’s Franchise

• Capriotti’s Sandwich Shop and Wing Zone Close Out 2022 with Agreements to Open 235 New Shops

• Capriotti’s Sandwich Shop and Wing Zone Experience Positive Momentum Throughout Q1

• Capriotti’s and Wing Zone Close Out Record-Setting Year

• Capriotti’s, Wing Zone End 2022 with Over 235 Locations

• Capriotti’s Sandwich Shops Lands on Inc. Magazine’s List of America’s Fastest-Growing Companies

• Capriotti’s Ranked No. 391 on Entrepreneur’s 2023 Franchise 500 List

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Capriotti’s Franchise (Item 19, 2023 FDD)

• This historical financial performance representation reflects certain actual operating results of the franchised and affiliate-owned Capriotti’s Restaurants described below during the 2022 calendar year.

• All of the Capriotti’s Restaurants (both franchised and affiliate-owned) whose information is included in this Item 19 are substantially similar to one another in terms of products and services offered and substantially similar to the Capriotti’s Restaurants for which Capriotti’s is offering franchises in the disclosure document.

• Capriotti’s did not materially change the Capriotti’s Restaurant franchise concept or business model due to the COVID-19 pandemic. Capriotti’s continues to shore up national distribution, improve operational efficiency and performance, enhance training programs, sign competitive vendor contracts, negotiate national pricing with delivery service providers, and enhance national and local marketing efforts.

• The “traditional” or “brick and mortar” Capriotti’s Restaurants disclosed in this Item 19 operate within a retail center, on a stand-alone basis, or at an in-line location with other businesses and have prominent exterior and interior branding. These Capriotti’s Restaurants operate a minimum of 10 hours per day, 7 days a week.

• The operational system is consumer-facing, directly serving products to consumers through dine-in and carryout options and indirectly serving consumers through delivery-service providers.

• The first portion of the financial performance representation discloses the actual unaudited historical average, median, and high/low annual gross sales during 2022 of all franchised (a total of 99 in 2022) and affiliate-owned (a total of 10 in 2022) traditional Capriotti’s Restaurants in the United States that were open and operating during all of 2022.

• It also discloses the average, median, and high/low annual gross sales during 2022 of: (i) the franchised (a total of 60 in 2022) and affiliate-owned (a total of 10 in 2022) Capriotti’s Restaurants that operate in “mature markets” (defined in the tables below); (ii) the franchised (a total of 84 in 2022) and affiliate-owned (a total of 10 in 2022) Capriotti’s Restaurants that had been open for more than 2 full years as of December 31, 2022; and (iii) the franchised (a total of 50 in 2022) and affiliate-owned (a total of 6 in 2022) Capriotti’s Restaurants that had been open for more than 10 full years as of December 31, 2022.

• This financial performance representation does not include the results of the following 54 Restaurants operating under the Capriotti’s mark: (a) 27 traditional franchised Restaurants that opened during 2022 (and therefore were not open for the full 2022 calendar year); (b) 6 traditional franchised Restaurants that permanently closed during 2022 (and therefore were not open for the full 2022 calendar year); (c) 1 franchised Restaurant that operated at a non-traditional location that permanently closed during 2022 (but would not have been included in this Item 19 in any event because it operated at a non-traditional location and therefore is not Capriotti’s prototypical franchised Restaurant); (d) 2 franchised Restaurants that operated at non-traditional locations during 2022 and had limited operating hours and therefore are not Capriotti’s prototypical franchised Restaurants; and (e) 18 locations (12 licensed under the licensee’s own form of contract and 6 franchised) operated in “ghost kitchens.”

• A “ghost kitchen” or “dark kitchen” operates within a non-branded, non-retail facing, or non-consumer facing facility. It operates within a facility where multiple other restaurant businesses run separate operations. This operational system indirectly serves products to consumers principally through delivery-service providers. It is a type of non-traditional location and not Capriotti’s prototypical Restaurant.

• Besides the annual gross sales of all traditional franchised and affiliate-owned Capriotti’s Restaurants in the United States that were open and operating during all of 2022, the second portion of this financial performance representation contains the actual average partial unaudited operating financial statement for 2022 for 10 affiliate-owned and operated traditional Capriotti’s Restaurants.

• Capriotti’s obtained the gross sales information for franchised Restaurants from sales reports submitted by franchisees. Capriotti’s has not independently audited that information.

• “Gross Sales” is currently defined in Capriotti’s Franchise Agreement as the total of all revenue and other consideration you generate from operating the Restaurant whether from sales for cash or credit, and irrespective of collection, including sales of merchandise, products, and services, excluding only (or, if applicable, reduced only by) the following: sales tax if paid to the appropriate government authorities; proceeds from the sale of equipment not in the ordinary course of business; promotional discounts you initiate and formally request and Capriotti’s pre-approves in writing, provided physical evidence of the promotion is retained; discounts granted on food purchased by employees for their own consumption; and any other exclusions or reductions Capriotti’s specifically identifies (although without any obligation to do so) in the Manual.

• The actual average, median, and high/low annual gross sales volumes reported below do not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross sales figures to obtain your net income or profit.

Part 1 – Sales Volume Information

Franchised Restaurants

2022 Results for All Franchised Restaurants Open During All of 2022

• Number of Restaurants in Range:  99
• Average Unit Volume:  $920,418
• Highest Sales:  $1,821,059
• Lowest Sales:  $461,129
• Number and Percentage of Restaurants Exceeding Average:  42 / 42%
• Median Unit Volume:  $866,388
• Average Unit Volume of Top 25th Percentile:  $1,302,417
• Highest Sales:  $1,821,059
• Lowest Sales:  $1,081,686
• Number and Percentage of Restaurants in Top 25th Percentile Exceeding Average:  10 / 40%
• Median Unit Volume of Top 25th Percentile:  $1,174,012
• Average Unit Volume of Bottom 25th Percentile:  $604,663
• Highest Sales:  $713,921
• Lowest Sales:  $461,129
• Number and Percentage of Restaurants in Bottom 25th Percentile Exceeding Average:  13 / 52%
• Median Unit Volume of Bottom 25th Percentile:  $618,714

2022 Results for All Franchised Restaurants Open in Mature Markets as of December 31, 2022

• Mature markets in this table are the States of Delaware, Maryland, Nevada, and Pennsylvania. There were 60 franchised Restaurants in those states that were operational during the entire 2022 calendar year.

• The first Capriotti’s Restaurant in one of these states opened in June 1976. The most recent Capriotti’s Restaurant opened in one of these states in October 2022.

• Number of Restaurants in Range:  60
• Average Unit Volume:  $947,853
• Highest Sales:  $1,821,059
• Lowest Sales:  $466,388
• Number and Percentage of Restaurants Exceeding Average:  24 / 40%
• Median Unit Volume:  $907,081
• Average Unit Volume of Top 25th Percentile:  $1,347,450
• Highest Sales:  $1,821,059
• Lowest Sales:  $1,086,982
• Number and Percentage of Restaurants in Top 25th Percentile Exceeding Average:  7 / 46%
• Median Unit Volume of Top 25th Percentile:  $1,288,306
• Average Unit Volume of Bottom 25th Percentile:  $645,240
• Highest Sales:  $725,115
• Lowest Sales:  $466,388
• Number and Percentage of Restaurants in Bottom 25th Percentile Exceeding Average:  9 / 60%
• Median Unit Volume of Bottom 25th Percentile:  $648,705

2022 Results for All Franchised Restaurants Open More Than 2 Years as of December 31, 2022

• Number of Restaurants in Range:  84
• Average Unit Volume:  $932,644
• Highest Sales:  $1,821,059
• Lowest Sales:  $461,129
• Number and Percentage of Restaurants Exceeding Average:  30 / 36%
• Median Unit Volume:  $843,067
• Average Unit Volume of Top 25th Percentile:  $1,264,800
• Highest Sales:  $1,821,059
• Lowest Sales:  $1,033,704
• Number and Percentage of Restaurants in Top 25th Percentile Exceeding Average:  11 / 52%
• Median Unit Volume of Top 25th Percentile:  $1,140,933
• Average Unit Volume of Bottom 25th Percentile:  $606,468
• Highest Sales:  $724,724
• Lowest Sales:  $461,129
• Number and Percentage of Restaurants in Bottom 25th Percentile Exceeding Average:  11 / 52%
• Median Unit Volume of Bottom 25th Percentile:  $619,134

2022 Results for All Franchised Restaurants Open More Than 10 Years as of December 31, 2022

• Number of Restaurants in Range:  50
• Average Unit Volume:  $927,700
• Highest Sales:  $1,821,059
• Lowest Sales:  $466,388
• Number and Percentage of Restaurants Exceeding Average:  21 / 42%
• Median Unit Volume:  $855,449
• Average Unit Volume of Top 25th Percentile:  $1,266,534
• Highest Sales:  $1,821,059
• Lowest Sales:  $1,022,913
• Number and Percentage of Restaurants in Top 25th Percentile Exceeding Average:  5 / 38%
• Median Unit Volume of Top 25th Percentile:  $1,155,192
• Average Unit Volume of Bottom 25th Percentile:  $668,217
• Highest Sales:  $771,345
• Lowest Sales:  $466,388
• Number and Percentage of Restaurants in Bottom 25th Percentile Exceeding Average:  7 / 54%
• Median Unit Volume of Bottom 25th Percentile:  $686,206

Affiliate-Owned Restaurants

2022 Results for All Affiliate-Owned Restaurants Open During All of 2022

• Number of Restaurants in Range:  10
• Average Unit Volume:  $1,081,567
• Highest Sales:  $1,691,098
• Lowest Sales:  $665,820
• Number and Percentage of Restaurants Exceeding Average:  4 / 40%
• Median Unit Volume:  $982,120

2022 Results for All Affiliate-Owned Restaurants Open in Mature Markets as of December 31, 2022

• Mature market in this table is the State of Nevada. There were 10 affiliate-owned Restaurants in Nevada that were operational during the entire 2022 calendar year.

• The first Capriotti’s Restaurant opened in Nevada in April 1993. The most recent Capriotti’s Restaurant opened in Nevada in February 2020.

• Number of Restaurants in Range:  10
• Average Unit Volume:  $1,081,567
• Highest Sales:  $1,691,098
• Lowest Sales:  $665,820
• Number and Percentage of Restaurants Exceeding Average:  4 / 40%
• Median Unit Volume:  $982,120

2022 Results for All Affiliate-Owned Restaurants Open More Than 2 Years as of December 31, 2022

• Number of Restaurants in Range:  10
• Average Unit Volume:  $1,081,567
• Highest Sales:  $1,691,098
• Lowest Sales:  $665,820
• Number and Percentage of Restaurants Exceeding Average:  4 / 40%
• Median Unit Volume:  $982,120

2022 Results for All Affiliate-Owned Restaurants Open More Than 10 Years as of December 31, 2022

• Number of Restaurants in Range:  6
• Average Unit Volume:  $1,044,557
• Highest Sales:  $1,691,098
• Lowest Sales:  $665,820
• Number and Percentage of Restaurants Exceeding Average:  2 / 33%
• Median Unit Volume:  $822,131

Part 2 – Income Statement Information

Affiliate-Owned Restaurants

Average of 10 Affiliate-Owned Restaurants Operated for a Full Year in 2022

Total Sales:  $1,110,242 (100.00%)

Total Prime Cost:  $568,399 (51.20%)

• Total Cost of Goods Sold:  $350,206 (31.54%)
• Store Level Salary:  $46,791 (4.21%)
• Store Level Bonus – Salary:  $3,881 (0.35%)
• Total Payroll and Related:  $218,193 (19.65%)

Total Operating Expense:  $158,856 (14.31%)

Total Non-Controllable Expense:  $193,229 (17.40%)

• Total Rent:  $60,695 (5.47%)
• Royalty Fee:  $64,903 (5.85%)
• National Marketing Fees:  $21,124 (1.90%)
• Local Marketing Cooperative Fees:  $21,124 (1.90%)

EBITDA (5.85% Royalty Fee):  $189,758 (17.09%)

Royalty Fee:  $75,719 (6.82%)

EBITDA (6.82% Royalty Fee):  $178,942 (16.12%)

• The Restaurants in this category represent all 10 affiliate-owned Restaurants in the State of Nevada.

• Total Cost of Goods Sold. This includes the total cost of all food, beverages, and paper goods used in the Restaurants.

• The average Cost of Goods Sold in markets for the affiliate-owned Restaurants from the table above for 2022 was $350,206 or 31.54% of total sales. A franchisee in a new market with less than 3 open Restaurants could expect that its Cost of Goods Sold will be higher, likely ranging between 1% and 2% of total sales. Some proprietary items might not be stocked by Capriotti’s local distributor, causing an increase in freight costs. If compared to the average above, a 2% increase would increase the average Cost of Goods Sold to $357,210 or 32.17% of total sales.

• Store Level Salary. This is the General Manager’s salary. Each affiliate-owned Restaurant has one General Manager.

• Store Level Bonus – Salary. Each General Manager has the opportunity to earn a bonus based on his or her management of Cost of Goods Sold and Labor.

• Total Payroll and Related. This includes all salary and hourly wages, bonuses, taxes, and benefits paid at each company-owned Restaurant.

• Total Prime Cost. This is the sum of Cost of Goods Sold plus Total Payroll and Related.

• Total Operating Expense. This includes comps, promos, cleaning supplies, linen, uniforms, equipment (purchases and rentals), repairs and maintenance, pest control, marketing and advertising, delivery expense, music, technology, telephone, permits, license, security, office supplies, postage, bank charges, credit card fees, and professional services.

• Total Rent. This includes base rent, common area maintenance, property tax, insurance, and (at some of the company-owned locations) a fee to be included on monument or pylon signs.

• Royalty Fee. Two affiliate-owned Restaurants pay a Management Fee equal to a 6% Royalty Fee. In this example, Capriotti’s takes into account the payment of Royalty Fees for all 10 locations. Royalties are not paid on discounts or couponing. Capriotti’s accounting system breaks up the 12 months into 13 separate 4-week accounting periods. This table represents the Royalty Fee of 6%, which would be paid by a multi-unit developer under the terms of an Area Development Agreement (rather than the 7% Royalty Fee payable by a franchisee who operates a single Restaurant).

• Marketing Fee – National. Each affiliate-owned Restaurant contributes to the National Marketing Fund. While Capriotti’s has the right to collect 4% towards the National Marketing Fund, it currently collects 2%. In this example, Capriotti’s takes into account the payment of National Marketing Fees for all 10 locations. Capriotti’s accounting system breaks up the 12 months into 13 separate 4-week accounting periods.

• Marketing Fees – Coop. All 10 affiliate-owned Restaurants contribute to the Las Vegas Cooperative. Capriotti’s subsidiaries currently operate 10 of the 36 Restaurants in that market. In this example, Capriotti’s takes into account the payment of Marketing Coop Fees for all 10 locations. Capriotti’s accounting system breaks up the 12 months into 13 separate 4-week accounting periods.

• Total Non-Controllable Expense. This includes total rent, in some instances personal property tax, electricity, gas, sewer, trash removal, water, TV, Management Fee (Royalty), Marketing Fees – National Fund and Local Cooperative, and accounting fees.

• EBITDA. This calculation uses the following formula (Total Sales minus Total Prime Cost minus Total Operating Expense minus Total Non-Controllable Expense = EBITDA).

Section VI – Capriotti’s Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️