How much to open a cookout franchise

We look at five of the biggest names in food franchising today, we explore how much money owners are making, and then compare  food franchise earnings with other popular industries like beauty, cleaning, senior care, staffing and more. Later on in the article we'll end up revealing two franchises that can make as much or more as some of the big-name food franchises, for an investment  that is 0 times less!

Everyone thinks they want to own a food franchise. They assume food franchise owners are the biggest moneymakers, but according to a Franchise Business Review report, 51.5 percent of food franchises earn profits of less than $50,000 a year and only about 7 percent of food franchises have profits over $250,000. The average profit for all restaurants in the report was $82,033.

 As you can see, only a small number of food franchises have high earnings and many owners find themselves struggling or have just bought themselves a job. Also, keep in mind, if you are looking at a very established franchise, you will in all likelihood get "leftovers" in terms of territory. In the majority of situations, the owners making the most money are the locations that opened up long ago and received the best territories. 

An argument we often hear is that someone knows someone who owns 10 Dunkin' Donuts and they did well financially, therefore they can also do well financially. Yes, there are in fact many successful food franchise owners, but keep in mind many of them opened years ago. There is likely several years worth of competition built up since that time. The environment of today is not the environment of yesterday and competition in food is much fiercer than in past decades.

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We will look at both gross and net revenues. For aspiring entrepreneurs' annual gross revenue is the total amount of money that comes into your store for all goods sold. Net income is how much money is left after you pay your rent, your payroll, your royalties, insurance and everything else. Net is really the important number, as 10 million a year gross revenue is not that impressive if  your expenses are 11 million!   There are other important numbers like discretionary income and EBITDA (earnings before interest taxes depreciation and amortization) we'll cover those in a future article or video. Have you subscribed to us on YouTube? Franchise City YouTube

Chick-fil-A Food Franchise Annual Earnings

The single highest grossing food franchise on the QSR50 is Chick-fil-A. An average Chick-fil-A generates 4.16 million dollars annually and your investment is only $10,000. But keep in mind that Chick-fil-A has a very different franchise model than other franchises and owners do not receive a traditional revenue split, or even ownership of the store. You'll earn a solid six figures, have limited risk, be part of a solid organization with traditional values but you do not own the store or gain any equity. 

It is also very difficult to get a Chick-fil-A restaurant .  The franchise  receives 10's of thousands of applications every year and typically opens between 80-100 restaurants.

What About McDonald's?

Buying a Mcdonald's will cost you between $1,263,000 to $2,235,000 not including your real estate. Many people think these numbers include real estate, they do not.

We'll cover what the expenses are involved in starting a food franchise in a future article. The single highest earning franchise in the entire McDonald's system in 2019 that was open for at least one year grossed $12,457,000, and the lowest location generated $557,000. The average system wide gross revenues for stores open more than 1 year is $2,815,000. But how much does the owner keep of that? Keep in mind your expenses, employees, rent, insurance, royalties and food costs all add up. Also your location has a huge impact on profits as rents in certain cities are very, very high, as are staffing costs in some states.

A high traffic area with low rents and payroll is the ideal scenario, but it can be hard to find good territories. Keep in mind that McDonald's franchises can and do lose money, and some can net half a million dollars or more. The general consensus is that a reasonable average net expectation for a McDonald's is around $150k per year.

Other Fast Food Burger Franchises

Opening a Burger King restaurant will set you back between $1,877,600 $3,283,600. Mean average sales of traditional locations for franchisee owned stores open at least 12 months was $1,417,443. Note the average gross revenue is about half of a McDonald's location. Their highest grossing store was $4,317,979, which is about 1/3 of the McDonald's highest grossing store. Again your rent costs, local expenses and other factors will greatly impact your net, however a 6% net revenue figure seems to be a reasonable average, putting an average Burger King franchise profit at about $85,000 per year. Again, some locations lose money, some are earning far in excess of this number.

Dunkin' Donuts financials breaks down earnings throughout the country so at the high end if you have a drive-thru freestanding building in the Northeast you'll average $1,397,936 and at the low end a freestanding restaurant with no drive-thru in the west only $974,874.00. Your cost to open a Dunkin' Donuts will be $465,725 to $1,597,200. Dunkin' brands average net revenues can be around 8-12% - we'll say 10% average so if your stores is doing 1 million you can expect a profit of around $100k per year.

The last food franchise on our list today is Subway. The average cost to open a traditional location is $233,325. Unlike the other franchises, Subway does not indicate earnings in their disclosure documents. But we can obtain data from the QSR50 and we see that an average Subway location grosses just over $400k. That is 10 times less than an average Chick-Fil-A. Subway is the second lowest on the chart with only Baskin Robbins lower at 360K. Sluggish revenues are likely a big reason they closed another 866 stores last year. Now even at a high 10% margin estimate, an average Subway store would be netting about $41,000 a year. Again, some locations lose money, some make a lot more but this is an average.

So you can see most people's perception of food franchises being huge moneymakers is incorrect. There are some food franchises that do have 20% margins or higher, but you have to know where to look. (Contact Franchise City for details) Multi unit owners can do very well but a single unit, unless you have a great location, is not going to generate a lot of money. Let's look at other industries to compare, and we’ll show you a couple of industries that can make as much or more as the top food franchises with one tenth of the cost.

Hair Salons, Barbershops and Beauty Franchises

This data comes from one of the biggest brands and locations open over 2 years. The gross revenues averaged $371,612, expenses were $293,870 leaving a yearly operating cash flow average of $77,742. Note this is cash flow, not net income. There are several emerging beauty and niche concepts that do have higher numbers up to about $90K+. Keep in mind most owners who purchase salons are looking for a semi-absentee or passive ownership situation, so these investors usually keep their job while starting their first salon and ramp up from there.

The average number of salons owned by franchisees in the system we referenced above after five years is 6.5 units.

Most owners will start with a single location and ramp up from there. As owners  don't make much with a single location multi-unit ownership is the preferred option. One problem we find with highly established brands is territory availability, so part of what we do is help buyers determine what brands are available, have open contiguous territory, and make the most sense demographically for their region. There are some very exciting emerging salon franchises that offer unique experiences like serving beer and scotch to customers, and several brands that have a membership hair cutting model, which I think will be a game-changer in the industry. This helps owners enjoy a predictable revenue stream. Your investment to start a single salon will range from around $150k at the low end, to $500k at the high end. Most brands look for minimal liquidity of $100k to $300k, and net worth between $200k to 1m. Minimum requirements will be higher in states like New York or California with high rents.

Childhood Education Franchises: These are franchises like Sylvan & Kumon. We won't give you the top name but the #1 highest earning franchise in the childhood education space grosses an average of $501,000 annually which is 53% higher than their closest competitor. These numbers can be deceptive because the footprint size of your location will have a huge impact on your bottom line, and some franchises have larger footprints than others, with some requiring no physical location at all.

Cleaning Franchises:

The single highest grossing franchise in the cleaning space generates 1.3 million per year, the top 1/3 franchisees are at 1.9 million. Investment is between $150-$200k including your working capital. This model is not to be confused with buying cleaning contracts which is a totally different model with a much smaller investment. Also not to be confused with a MASTER cleaning franchise which is more about selling franchise contracts. A master cleaning franchise is a great business for people with sales experience, and the average gross for a cleaning master franchise is $2,800,000, top earners at $5,800,000 . A master cleaning franchise will have an investment range of between $240k and $400k. 

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Senior Care Franchises

This is a massive growth industry right now with 10,000 boomers turning 65 every day, and that trend will continue for many years to come. Most of these franchises provide in-home care to seniors, and owners hire and manage teams of caregivers. Not all franchises in this sector earn millions but some do - up to $1,500,000. So you can potentially generate the same revenue as a Taco Bell Franchise, 1.6 million per year, with a much lower investment - a Taco Bell franchise will cost about 1.6 million to open, a senior care franchise is around 100-150K. We also have a senior care franchise in our portfolio with a territory that generates more than $30,000,000! Note that is almost 3 times higher than the highest earning McDonald's location, which is a 2.6 million dollar investment.

Employment & Staffing Franchises 

We have covered this industry before. Gross revenue for an average mature staffing office almost $6,500,000 annually and we have seen single locations over $20,000,000. The investment for a staffing franchise is around $150,000, so 10 times however than most major food franchises.

The million-dollar question... Why doesn't everybody just buy the top-grossing senior care or staffing franchises? Ten times lower investment with million dollar earnings?  

Firstly people don't know how much franchises make! It would take years to call all 4,000 franchises, complete their applications, wait for the FDD, to determine the highest-earning brands. 

Smart investors call Franchise City because we have all the data on file. But more importantly, not everyone has the skills or background to successfully operate a senior care or staffing franchise. If you are a bad fit, even with the top franchises, you will not make money. A Taco Bell will have people walking in and buying a taco, but it doesn't really matter if you have no business skills, or are not a good communicator.  With senior care, staffing and service-based businesses in general the owner is driving that business forward and they need to have specific skills in order to succeed. We provide a detailed skills assessment to all our clients as part of our free service.

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You can see why most franchises prefer that buyers don't know their earnings! When you compare them against the top performing franchises brands, they simply don't hold up. Lack of information  s a big reason so many people end up buying a job or making a poor decision when investing in a franchise. 

There are only a few franchises at the top of their respective industries for earnings and the vast majority are mediocre.  

If buyers do manage to access the company financials in the FDD, it is almost always listed as gross revenue. Franchises collect royalties on gross earnings, so they typically don't track the net. We help our clients gather the net numbers to make a more informed decision.   

The key is to find the most profitable franchise, best suited to your skills, demographics, market demand and other criteria and thereby maximize the likelihood of your success. And that is exactly what we help buyers do! If you would like to learn more about our service (free to qualified buyers) click the button above. 

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