Fazoli’s Franchises Profits, Costs & Stats (2023)

One of the few Italian restaurant franchises with a a complete Italian menu set, Fazoli’s is an attractive franchise if you want to try to differentiate yourself from all the famous Pizza franchises.

Yet, investing in a Fazoli’s restaurant isn’t the most affordable option either: on average you would have to invest $1.9 million yourself or from a bank loan. But what about the profits?

Even though Fazoli’s is a profitable restaurant franchise (we found profit margins are in the 28% range), the cost is still quite an issue for the payback period to work.

Want to know how much you can make with a Fazoli’s restaurant as a franchisee? Let’s dive in!

Key stats

Franchise fee	$40,000
Royalty fee	5.00%
Marketing fee	4.00%
Investment (mid-point)	$1,882,000
Average sales	$1,094,000
Sales to investment ratio	57.0x
Payback period*	[franchise_value_investment_payback]
Minimum net worth	$1,250,000
Minimum liquid capital	$500,000

Fazoli’s: a brief introduction

Fazoli’s is a Lexington-based American fast casual restaurant chain with a vast experience in the fast food industry. 

It was launched in 1988 by Kunihide Toyoda and is known for premium quality Italian-American cuisine. 

Fazoli’s’ alluring menu includes meatballs, spaghetti, pizza, submarine sandwiches, lasagna, breadsticks, ravioli, salads, and Fettuccine.

In addition, the restaurant chain offers catering services to specific US locations.

Fazoli’s started franchising in 1991, and today, it boasts over 220 units in 27 US states.

Sentinel Capital Partners, a private equity firm, have owned the fast-food restaurant company since 2015 after acquiring it from Sun Capital Partners.

Fazoli’s franchises: pros and cons

Pros

• Standout Italian dishes: Fazoli’s Italian-American dishes are a breath of fresh air in a fast food industry dominated by chicken, burgers, and tacos. The universally appealing menu has made the fast-casual restaurant an admirable franchising opportunity. 
• Explosive growth potential: Fazoli’s offers a lucrative and exciting investment opportunity with its scalable business concept. Its fast-growing nature, paired with the competitive startup costs, gives franchisees limitless growth opportunities in a crowded fast-food industry. 
• Zero-down franchise fee: with a zero-down franchise fee for the first investment year, Fazoli’s gives restaurant owners a competitive yet rewarding way to run their businesses. When starting the franchise, franchisees only have to worry about the training and advertising costs.  
• Third-party financing: the American fast casual restaurant partners with third-party financers to help the brand owners cover the startup costs, the franchise fee, equipment, and inventory. 
• Extensive training: the brand provides extensive training, including 90-100 hours of on-the-job training and 16 hours of classroom training to equip franchisees with everything they need to operate a modern, successful, and competitive franchise. Franchisees learn everything about the business, from staff management to customer service, products, and operations. 
• Exclusive territories: the fast-casual restaurant offers a fixed area for franchisees to start and operate their businesses. The franchisor doesn’t allow competing units to operate within the same territory. This gives franchisees massive room for growth by constantly exploring the market for better opportunities. 

Cons

• Prefers candidates with background experience: an ideal franchisee must demonstrate solid experience running a similar unit. This might put off novice investors.  
• No absentee ownership: Fazoli’s franchise isn’t a passive investment. Restaurant owners must be involved in everyday operations. 
• No part-time ownership: the franchise agreement dictates that Fazoli’s franchise is a full-time, long-term investment opportunity. 
• It can’t be run from home or as a mobile unit: restaurant owners must run the franchise from physical locations.
• Competition from pizza chains (Marco’s Pizza, Pizza Ranch, Blaze Pizza, Hungry Howie’s, Mountain Mike’s, etc.)

How much does a Fazoli’s franchise cost?

You would have to invest an average $1,882,000 to open a new Fazoli’s franchise restaurant.

Note that this is the investment required to open a freestanding restaurant. Indeed, the vast majority of restaurants are freestanding (148 out of the 159 total franchised restaurants).

To clarify, there are 3 main kinds of formats of restaurants you can choose: the Freestanding restaurant, In-line/End cap restaurant and Non-traditional restaurant.

Here’s the full breakdown of costs per restaurant format:

Investment breakdown: Freestanding restaurant

Expense category	Amount
Franchise fee	$30,000 – $50,000
Cost of the building	$825,000 – $980,000
Furniture, fixtures and equipment	$150,000 – $450,000
Training expenses	$10,000 – $35,000
3 months working capital	$60,000 – $120,000
Other	$360,500 – $693,500
Total	$1,435,500 – $2,328,500

Investment breakdown: In-line/End-cap restaurant

Expense category	Amount
Franchise fee	$30,000-$50,000
Cost of the building	$425,000-$540,000
Furniture, fixtures and equipment	$150,000-$450,000
Training expenses	$20,000-$35,000
3 months working capital	$60,000-$120,000
Other	$98,500-$358,500
Total	$783,500-$1,553,500

Investment breakdown: non-traditional restaurant

Expense category	Amount
Franchise fee	$15,000
Cost of premises construction	$225,000 – $313,000
Furniture, fixtures and equipment	$290,000 – $450,000
Training expenses	$20,000 – $35,000
3 months working capital	$30,000 – $60,000
Other	$43,000 – $118,000
Total	$623,000 – $991,000

Investment breakdown: delivery-only restaurant

Expense category	Amount
Franchise fee	$15,000
Cost of premises construction	$125,000 – $225,000
Furniture, fixtures and equipment	$150,000 – $335,000
Training expenses	$5,000 – $17,000
3 months working capital	$30,000 – $60,000
Other	$52,500 – $103,000
Total	$377,500 – $755,000

What’s the average turnover of a Fazoli’s?

On average, a Fazoli’s franchise makes $1,094,219 in sales per year.

This is the average sales per restaurant for the 137 of the 159 franchised restaurants that were open for all of 2022. This ranges between $786,094 and $1,434,027.

How profitable is a Fazoli’s franchise?

On average, a Fazoli’s franchise makes $305,287 profits per year. This corresponds to a 28% adjusted EBITDA margin. 

Fazoli’s is a profitable franchise. Indeed, we found that the 28% profit margin is higher than the average for similar restaurant franchises (25-27%). 

We calculated this number using the information available in the Franchise Disclosure Document 2022. Fortunately, Fazoli’s provides detailed information on the cost structure of its franchised-owned stores.

Profit and loss	Amount ($)	As % of sales
Sales	$1,094,219	100%
COGS	($304,193)	27.8%
Labor	($310,758)	28.4%
Rent	($75,501)	6.9%
Royalty + marketing fees	($98,480)	9.0%
Adjusted EBITDA	$305,287	~28.0%

Is a Fazoli’s franchise a good investment?

Even though Fazoli’s can be a very profitable business with a 28% profit margin as we just saw, it’s not the most profitable when add the initial investment into the mix.

Indeed, as we saw before it costs on average $1,882,000 to open a new Fazoli’s restaurant. Yet the average annual turnover is (only) $1,094,219. So even if we were to consider a 15% net profit margin, Fazoli’s would have a payback period of 11.5 years…

That’s not the best payback we found for restaurant franchises to say the least. In general, a good payback is around 5-6 years and anywhere below 5 years is very good. Instead, you would have to wait almost 12 years for the profits to repay the initial investment cost with Fazoli’s.

That being said, your decision to open a franchise shouldn’t be limited to financials: instead you should take into consideration factors like training, support, competition, brand name, etc.

How does it compare vs. other restaurant franchises?

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