Chili’s Franchise Costs $1.8M – $6.5M (+ 2024 Profits)

Chili’s Grill & Bar, a renowned name in the casual dining restaurant industry, is known for its American and Tex-Mex inspired cuisine, including iconic items like the Big Mouth Burger, fajitas, and the famously jingle-popularized baby-back ribs.

Founded by Larry Lavine in Dallas, Texas, in March 1975, Chili’s has grown to become a cornerstone of American casual dining. The brand’s journey took a significant turn when it was sold to Norman Brinker, a pioneer in casual dining, in 1983, marking the beginning of a new chapter that led to the brand going public in 1984.

Headquartered in Dallas, Chili’s is part of Brinker International Inc., which also owns other restaurant concepts, making it a heavyweight in the industry. The brand stands out not just for its food but also for its commitment to providing a friendly and inviting dining experience, complemented by a full-service bar that features the signature Presidente margarita, among other beverages.

Type of Expenditure	Amount (Chili’s Grill & Bar)
Initial Franchise Fee	$40,000 – $60,000
Leasehold Expense	$9,000 – $28,000
Pre-Construction	$75,000 – $350,000
Construction Costs	$2,000,000 – $2,500,000
Site Works	$300,000 – $1,000,000
Exterior Signage	$40,000 – $150,000
Furniture/Fixtures/Sound System/TVs	$500,000 – $600,000
Kitchen/Bar Equipment	$350,000 – $400,000
Opening Advertising	$5,000 – $10,000
Initial Training	$65,000 – $250,000
Opening Team Costs	$100,000 – $150,000
Working Capital	$20,000 – $30,000
Inventory	$75,000 – $100,000
Bar/Kitchen Accessories	$50,000 – $60,000
Computer POS System/Kitchen display system/Installation	$75,000 – $90,000
Online Ordering	$695
Additional Funds (3 months)	$525,000 – $725,000
Total	$4,230,000 – $6,504,000

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.

Initial Franchise Fee

For a Chili’s franchise, the initial franchise fee ranges from $40,000 to $60,000.

Royalty Fee

A recurring fee calculated as 1.25% of Gross Sales. This fee contributes to ongoing franchisor support and the use of the brand.

Technology Fee

A fee, representing 2.75% of Gross Sales, charged for the use of technology and systems provided by the franchisor.

Transfer Fee

Incurred when a franchise is transferred to another owner, the greater of $5,000 or expenses reimbursement, capped at $25,000.

Management Fees

Charged at 10% of Gross Sales, these fees cover the franchisor’s management services, possibly including operational support and oversight.

Franchise Pros and cons

Pros

• Quality Training: The brand provides its franchisees with sufficient training to help establish and operate their restaurants successfully. Franchisees undergo a 15-week initial training on how to make the products, handle customers, manage staff, and carry out a successful grand opening.
• Leading-edge digital technology: The brand utilizes digital technology to boost sales and franchisee productivity. Franchise owners can monitor and analyze trends using app-enabled data on their phones. Also, franchisees can offer excellent service to customers using an online ordering app and boost their sales.
• Site selection and construction: The brand helps its franchisees identify a convenient restaurant location, considering vehicle traffic and geographic trends. Also, it assists them in the design, restaurant construction, and lease negotiations necessary to reduce the cost of developing their restaurants.
• Multiple income channels: The franchisor provides its franchisees with various flexible channels such as carryout, pick-up, delivery, and catering options. The franchisees can stand out from the competition with multiple earning streams and boost their sales.
• Franchise support: The brand facilitates its franchisees with the resources, advice, and tools they need to establish, operate, and grow their businesses. This is done through field operations, ongoing consultations, meetings and conventions, safety and security procedures, data-driven analytics, and franchise intranet software.
• Flexible franchise models: Chili’s franchise utilizes different business models, including traditional and non-traditional restaurants with a full or limited menu. Franchisees can make the most of the available real estate opportunities and establish a restaurant of their choice.

Cons

• No exclusive territory protection: The brand does not provide its franchisees with an exclusive development market. Franchisees may face competition from other franchises licensed by the franchisor or from competitive channels and brands it controls.
• No financing: Chili’s franchise does not directly or indirectly finance its franchisees for start-up or ongoing costs. Also, it does not guarantee any grant, lease, or note on behalf of its franchisees.
• No absentee ownership: The brand does not provide a passive investment opportunity. Franchisees must be actively involved in the day-to-day operations of the business.

How to open a Chili’s Franchise

Opening a Chili's franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a Chili's franchise.

1. Conduct Thorough Research

• Brand Understanding: Familiarize yourself with Chili’s history, culture, and menu offerings to ensure alignment with your business goals.
• Market Analysis: Evaluate the local market to determine the demand for a Chili’s Grill & Bar, considering factors like competition, location demographics, and consumer preferences.
• Franchise Model: Gain a comprehensive understanding of Chili’s franchising model, including cost, fees, support, and requirements.

2. Assess Your Financial Standing

• Initial Investment: Understand the financial commitment required to open a Chili’s franchise, including the franchise fee, startup costs, real estate, equipment, and inventory.
• Financial Requirements: Ensure you meet Chili’s financial requirements for franchisees, which may include liquid capital, net worth, and access to financing.
• Budget Planning: Create a detailed budget that accounts for all potential costs and financial projections for your franchise.

3. Submit Franchise Inquiry and Application

• Franchise Inquiry: Start by submitting a franchise inquiry through the official Chili’s franchising channel to express your interest and provide initial details about your candidacy.
• Application Process: Fill out the franchise application with comprehensive information about your background, financial capacity, and business experience.

4. Attend Discovery Day and Interview

• Discovery Day: If your application is considered, you might be invited to attend a Discovery Day at Chili’s headquarters or a designated location to learn more about the franchise opportunity.
• Interview: Participate in interviews with the Chili’s franchising team to discuss your application, expectations, and how you plan to operate your franchise successfully.

5. Review Franchise Agreement

• Legal Review: Go through the franchise agreement carefully, preferably with the assistance of a legal advisor specialized in franchise businesses, to understand your rights and obligations.
• Clarification and Negotiation: Seek clarification on any terms and negotiate, if possible, the conditions that are crucial to your business plan.

6. Secure Financing

• Funding Options: Explore financing options, which may include bank loans, Small Business Administration (SBA) loans, or partnerships, to secure the necessary capital for your franchise.
• Financial Approval: Obtain approval for financing based on your business plan and the franchisor’s credibility.

7. Finalize Location and Build-Out

• Site Approval: Collaborate with Chili’s real estate team to identify and approve a suitable location that meets the brand’s site selection criteria.
• Construction and Design: Follow Chili’s guidelines for restaurant design, layout, and construction to ensure the location reflects the brand’s standards and atmosphere.

8. Undergo Training

• Comprehensive Training: Complete the required training program provided by Chili’s, which includes operational procedures, menu knowledge, customer service, and management skills.
• Staff Training: Hire and train your staff according to Chili’s training protocols to ensure high-quality service and adherence to brand standards.

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.