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A&W Restaurants Franchise Costs $278K – $1.6M(+ 2024 Profits)

A&W Restaurants, an iconic brand woven into the fabric of American dining culture, offers a unique franchise opportunity that draws from its rich heritage dating back to 1919. As the oldest restaurant franchise in America, A&W has cemented its legacy through a century of innovation and commitment to quality, epitomized by its signature root beer served in iconic frosty mugs—a tradition that started at a roadside stand in Lodi, California by founder Roy W. Allen, later joined by Frank Wright to form the brand name A&W. 

The franchise began its journey in 1926, establishing a model that has since expanded across the globe while retaining the core values that make A&W a beloved destination for multiple generations​​.A&W Restaurants is headquartered in Lexington, Kentucky.

A&W stands out in the fast-food industry not just for its nostalgic appeal, but also for its adaptability and resilience, having thrived through economic challenges including the Great Depression and recent global upheavals. 

The brand’s continued evolution includes embracing modern technology such as self-service kiosks and a centralized Point of Sale (POS) system, enhancing the customer experience while maintaining the charm and quality that have been A&W’s hallmark for over a century​.

a financial plan for a franchise
a financial plan for a franchise

Initial investment

Type of ExpenditureAmount
Building and Equipment Costs$800,650 – $1,350,487
Initial Franchise Fee$15,000 – $30,000
A&W Grand Opening Promotion Deposit$5,000
NAC Advertising Trust Fund Management Training Course Expenses$3,000-$10,000
On-Site Team Member Training Expenses$6,000 – $25,000
Miscellaneous Opening Costs$6,000 – $12,402
Opening Inventory$6,000 – $12,000
Additional Funds – 3 Months$30,000 – $150,000
TOTAL$871,650 – $1,594,889

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Franchise fees & Royalties

Initial Franchise Fee

  • For new franchisees opening a Freestanding or Inline Restaurant: $30,000
  • For existing franchisees (as of March 31, 2023) in good standing, opening a second Freestanding or Inline Restaurant: $19,500
  • For existing franchisees in good standing, with two or more operational Freestanding/Inline Restaurants, opening another: $15,000
  • For Captive Restaurants: $15,000

Royalty Fee

  • General: 5% of net sales, with incentives for new Restaurants:
    • No royalty for the first 3 months after operations commence
    • 3% of net sales for the first year after the initial 3 months
    • 4% for the second year
    • 5% from the third year onwards

Advertising Fee

  • General: 5% of net sales for all Restaurants except Captive Restaurants and Co-Brand Restaurants (transferees signing new franchise agreements).

Grand Opening Promotional Deposit

  • For Freestanding or Inline Restaurants: $5,000
  • For Captive Restaurants: $2,500

Renewal Fee

  • General: $2,500 to be paid before signing the renewal franchise agreement.

Transfer Fee

  • General: $5,000 for each approved transfer of the Franchise Agreement. No charge if transferred to an immediate family member or a controlled corporation.

Audit Fee

  • Costs of audit and underpaid fees plus 18% interest on underpayment (if audit shows an understatement of 2% or more of sales for any month).

Training Fees

  • Additional trainee charge for the Management Training Course: $200 per person per day.
revenue

Revenue & Profits

a financial plan for a franchise
a financial plan for a franchise

Franchise Pros and cons

Pros

  • Exclusive territory: The franchisor grants franchisees a protected territory where they operate their business. As long as the agreement is in place, the franchisor will not grant or establish franchises to operate in the trading area.
  • Passive investment opportunity: A & W Restaurants does not require franchisees to actively participate in the daily operations of their restaurants. Therefore, franchisees can pursue other investments.
  • Franchise support: The parent company gives its franchisees solid support in their operations so that they can grow and succeed. Their support includes security and safety operations, grand openings, online support, and field operations.
  • Restaurant development: The brand offers real estate expert advice to franchisees on how to select a convenient location for the restaurant and design it. Also, franchisees get helpful guidance on site selection, lease negotiation, site planning, and construction at low costs.
  • Marketing support: The franchisor has elaborate and effective market planning support and promotional campaigns. These include national media, regional advertising, ad templates, website development, social media, and email marketing.
  • Operational excellence: The brand has a proven and successful business model. Franchisees are guaranteed the best infrastructure and guidance in establishing their restaurants, hiring qualified staff, reducing operating costs, avoiding waste, and improving their profitability.

Cons

  • No financing: The brand does not directly or indirectly finance its franchisees’ development or ongoing costs. It also does not guarantee any lease, note, or obligation on behalf of the franchisees.
  • Competition: Despite the brand being an all-American menu franchise, it faces stiff competition from brands in the same industry. These are McDonald’s, Dairy Queen, Taco Bell, and Burger King.
  • Not a part-time business: The A&W Restaurant franchise is not a good option for a part-time business. Franchisees are required to open full-time.

How to apply

1. Research A&W and the Fast-Food Industry

  • Understand A&W’s brand history, menu offerings, and company culture.
  • Study the fast-food industry, market trends, and potential competition.

2. Evaluate Financial Investment

  • Review the financial requirements for opening an A&W franchise, including initial investment costs, ongoing fees, and personal financial qualifications.

3. Submit an Inquiry and Application

  • Complete an initial inquiry form on the A&W franchising website to express interest.
  • Fill out and submit the official franchise application, providing detailed financial information and background.

4. Attend Discovery Day

  • Participate in a Discovery Day event hosted by A&W to gain insights into the franchise system, meet the corporate team, and ask questions.

5. Secure a Location

  • Work with A&W’s real estate team to find and secure an ideal location for your restaurant, adhering to company guidelines for site selection.

6. Finalize Financing

  • Arrange financing for your franchise, whether through personal assets, loans, or other financial instruments, ensuring you meet all financial requirements.

7. Sign Franchise Agreement

  • Upon approval, sign the franchise agreement with A&W, formalizing your commitment and outlining the terms of your franchise ownership.

8. Complete Franchise Training

  • Undergo comprehensive training provided by A&W, covering all aspects of operating a franchise, from day-to-day management to marketing strategies.

Disclaimer

Disclaimer: This content has been made for informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, advertisement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.

All content in this article is information of a general nature and does not address the detailed circumstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial and/or legal advice, nor does any information in the article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in this article before making any decisions based on such information or other content.

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