If you’re considering investing in a sandwich franchise, it’s essential to understand the various costs associated with owning and operating one. The costs of a sandwich franchise include more than just the initial investment or startup costs. There are also ongoing fees such as franchise fees, franchise royalties, and franchise advertising fees. A sandwich franchise can be an attractive investment, but not all franchises are the same.. Let’s take a deeper dive into how restaurant franchise fees and royalties work, with a particular focus on the sandwich franchise market.
Sandwich Franchise Cost
Two questions any investor has before opening a restaurant franchise of any kind—”How much will it cost?” and “Is this franchise a proven business model?”. Unfortunately, there is no singular answer. The average cost of opening a sandwich franchise can vary significantly depending on the franchise brand, location, and size of the restaurant. According to Franchise Direct and their experts, the initial cost for a franchise can range anywhere from a few thousand to a few hundred thousand dollars.
For the most accurate estimate of the total cost, you’ll want to read through the Franchise Disclosure Document (FDD). The FDD is a legal document which franchisors are required to provide potential franchisees. FDDs provide important information about the franchisor, the franchise system, and the terms of the franchise agreement. However, it’s also important to do your own independent research before making any investment.
Franchise Royalty Fees
In addition to initial franchise fees, franchisees are typically required to pay franchise royalty fees. Royalty fees are ongoing payments made by franchisees to the franchisor in exchange for the right to use the franchisor’s brand name, operating systems, and ongoing support. These fees are typically calculated as a percentage of the franchisee’s net revenue or a flat fee paid on a regular basis (e.g., weekly or monthly).
Royalty fees are typically outlined in the franchise agreement. The percentage and how it is calculated can vary widely depending on the franchisor and industry. Before entering into a franchise agreement, it’s essential to review the fee structure carefully and understand the ongoing costs associated with operating a franchise. Just as important, understand what services are provided by the franchisor for those royalty fees, other than the use of their marks and the right to operate under the brand’s name.
Other Franchise Fees
In addition to initial franchise fees and royalties, many franchisors require their franchisees to contribute to a national advertising fund. This fund is used to promote the franchise brand across various advertising channels, including television, print, and online media. Franchise advertising fees for sandwich franchises will also depend on the brand. This information can also be found in the FDD. National advertising helps strengthen brand recognition and bring more customers to your store.
Some franchisors may require higher franchise fees, royalties, and advertising fees than others, so it’s essential to thoroughly research and compare different franchise opportunities before making a decision.
Make Sure a Sandwich Franchise is Right for You
Owning a sandwich franchise comes with various costs, including initial franchise fees, renewal fees, franchise royalties, franchise advertising fees, and ongoing product and supply costs. The benefits of using a name brand help to set a business up for success from the get-go. Customers are already connected with the product and service, and you’re given access to a the brand’s established playbook or business model. It is important to understand if the franchisor is making money from rebates for purchases made by its franchisees. Some brands have proprietary products you’re required to purchase, and at the same time, the franchisor makes additional money from those purchases. Having an understanding of how the franchisor makes money is therefore extremely important.
The restaurant franchise cost varies widely depending on the franchise brand and the location of the restaurant, so it’s crucial to do your due diligence and research before making any investment decisions. Ensuring the franchise fits your personal beliefs and goals is as important as the cost. With the right knowledge and preparation, owning a sandwich franchise can help to position investors toward locating profitable and rewarding new business investment opportunities.
Franchise with Penn Station East Coast Subs
Penn Station East Coast Subs is a distinguished franchise dedicated to supporting the success of every location. Our mouth-watering, hot-grilled subs are served with fresh-cut fries and fresh-squeezed lemonade. Our customizable and craveable products, made with premium meats and cheeses, are what keeps our customers coming back for more. Our top-notch support system is what brings franchisees to Penn Station East Coast Subs. We have big plans for growth, and now is the best time to get started.
Be sure to check out our FDD for a full picture of our fee structure, but here are the highlights:
- Initial Franchise Fee: $25,000
- Royalty Fee: 2%-8% (varies by sales volume)
- National Advertising Fee: 2% (max of 3%)
- Development Agreement: $3,500 per restaurant reserves the development rights to each territory.
If you’re ready to own a Penn Station East Coast Subs location, contact us for more franchise information today.