Culver’s Franchise AUV, Profits vs. $4.9M Cost (2023)

Another popular fast food chain in the Midwest, Culver’s franchisees can rely on a strong brand awareness and the 893 restaurants the chain operates across the country. Yet, opening a Culver’s franchise isn’t for everyone.

Indeed, it comes at a hefty price tag: you would have to spend over $4 million on average to start a Culver’s franchise..! Is this worth the profits? How profitable is a Culver’s franchise?

In this article we’ll looking at Culver’s franchises: how much profits they make, how much they cost and whether it’s a good investment as a franchisee. Let’s dive in!

Key stats

Franchise fee	$55,000
Royalty fee	4.00%
Marketing fee	6.50%
Investment (mid-point)	$4,876,000
Average sales	$3,217,000
Sales to investment ratio	6.0x
Payback period	[franchise_value_investment_payback]
Minimum net worth	$2,000,000
Minimum liquid capital	$350,000

About Culver’s

Culver’s is a leading American casual fast-food chain, primarily located in the Midwestern United States with 893 restaurants across 26 states in the US.

It was founded in 1984 by George, Ruth, Craig, and Lea Culver, and its first restaurant was in Sauk City, Wisconsin.

Culver’s serves mainly butter burgers and frozen custard and also offers cheese curds, chicken, fish, and salads.

Its franchising journey started in 1990, and its first franchise was located in Baraboo, WI. The Culver’s franchise is run by the privately held Culver’s Franchising System, LLC, which is based in Prairie du Sac, Wisconsin.

Culver’s franchise pros and cons

Before starting a Culver’s franchise, it is important to know its advantages and disadvantages.

Pros

• Strategic marketing and advertising: To differentiate itself from its competitors, Culver’s has put in place effective marketing strategies. New franchisees can promote their products to a wide market and loyal customers through well-crafted television commercials and excellent brand awareness.
• Training and support: The Culver’s franchise offers excellent support and training to its franchisees. As a new franchisee, you benefit from site selection, construction, operations, food handling, finances, and management training to get started in successful franchising. In addition, Culver’s also provides on-the-job training and consultation on how franchisees can best operate their businesses and increase profitability.
• Quality food supplies: Quality foods are one of Culver’s brands’ strengths. And to achieve the required standards, they employ strict obligations and restrictions on suppliers. This way, franchisees can guarantee to offer quality food to their loyal customers.
• Fast Growth: The chain store has experienced rapid expansion in recent years. Having excellent sales and revenue as well as restaurants in most of the states shows how popular the brand is becoming. Therefore, new franchisees can be assured of a brand with a lot of potential for growth and profitability.
• Customer loyalty: Culver’s enjoys a huge customer following for its tasty and quality burgers. As new franchisees open, customers will flock to any Culver’s restaurant. This makes it easy and cheap for newly launched franchisees to market and advertise their products.
• Franchisee community: Culver’s began as a family-oriented restaurant to financially support their growing family. As it grows, it continues to bring together a big family of like-minded franchisees. New franchisees benefit from joining a network that offers much-needed consultations on how to run their businesses properly and shares success ideas.
• Popular brand: Culver’s brand is well known, especially in the Midwestern US. As a result, the brand has a ready market for its casual fast food. With a large following, especially in these territories, franchisees have great potential for the growth of their restaurants.

Cons

• Not a passive investment: If you’re looking for a passive investment, then Culver’s franchise is not a good option. This is because it requires franchisees to be fully in charge of the operations and management of their restaurants.
• Competition: With changing customer tastes and trends, many people are considering healthy eating habits. In addition, customers have more options as other major brands enter the market. This makes fast food less attractive and Culver’s franchises less profitable.
• No financing: The franchisor does not offer financial assistance to interested franchisees, directly or indirectly. It also does not guarantee any lease, note, or obligation by its franchisees. In addition, it does not receive any payment or consideration for the financing of franchisees.
• No global presence: The brand does not have locations outside the US, where it first started operations. New franchisees can find it difficult to market and make reasonable sales, especially in other areas.

How much does a Culver’s franchise cost?

To own a Culver’s franchise, you must invest $4,876,000 on average. This amount includes the initial franchise fee of $55,000.

As the investment amount is an estimated average, it can change depending on your location and other factors. According to the latest FDD, this amount can be as low as $2,524,000 and as high as $7,228,000.

The investment amount should cover all types of expenditures that may incur at the beginning of a fast-food restaurant.

For instance, you will pay for both the build-out costs (like land, site work, building, travel & living expenses during training, furniture, fixtures, sign package, pos system, equipment, etc.) as well as operating expenses (like initial inventory, and additional funds as working capital to cover the first three months’ losses, etc.).

Type of Expenditure	Low	Average	High
Initial franchise fee	$20,000	$37,500	$55,000
Build-out costs	$2,409,000	$4,711,000	$7,013,000
Operating expenses	$95,000	$127,500	$160,000
Total	$2,524,000	$4,876,000	$7,228,000

What is the turnover of a Culver’s franchise?

On average, a Culver’s franchise makes $3,217,000 in sales annually (the “Average Unit Volume”). That’s a +5.4% increase vs. 2021.

This number is the annual median sales of 815 Culver’s franchises operating in 2022 in the USA.

As this number is an average, it can vary depending on the location of a restaurant. For example, a restaurant located in a metropolitan area makes slightly greater sales compared to a restaurant in a non-metropolitan area:

How profitable is a Culver’s franchise?

Fortunately Culver’s provides a lot of information on the profitability of its restaurants. It does provide in its FDD a detailed profit and loss for its company-owned restaurants which we are including below.

On average, Culver’s restaurants make $261,000 in profits per year (8.6% EBITDA margin).

Profit and loss	$	% Sales
Sales	3,046,129	100%
Food costs	1,015,767	33.3%
Paper costs	95,774	3.1%
Salaries and wages	1,008,072	33.1%
Employee benifits	163,595	5.4%
Direct operating expenses	13,370	0.4%
Supplies and chemicals	35,917	1.2%
Utilities	64,943	2.1%
General and adminstrative	95,300	3.1%
Repairs and maintenance	63,427	2.1%
Advertising royalty	76,153	2.5%
Local advertising	30,461	1.0%
Royalty	121,845	4.0%
EBITDA	261,505	8.6%

Is a Culver’s franchise a good investment?

Culver’s has a very high initial investment. So naturally, as a franchisee you might wonder whether Culver’s is a good investment.

When we compare investment cost to profits, we estimate that the payback period is rather long: 15 years on average.

This means you would need to wait almost 15 years before you can reimburse your initial investment of $4 million using the profits generated by your franchised restaurant.

Of course, this is an average. So it’s possible that your franchise is more profitable than the average and fares better vs. others.

Disclaimer

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