Lee’s Famous Chicken Franchise: High Profits vs. Low $660K Cost

It’s not easy to make profits as a chicken cuisine restaurant when you’re facing strong competition from the giants KFC, Chick-fil-A and many others. But despite its smaller footprint (130 restaurants), Lee’s Famous Recipe Chicken is actually one of the most profitable chicken franchise we found.

Indeed, with a turnover of $1.4 million per year on average but an initial investment of $660,000, its sales-to-investment ratio is already quite impressive (2.2x).

But what about profits? We found Lee’s Famous Recipe Chicken restaurant have profit margins of up to 26%, resulting in an impressive 4 years payback.

Want to hear more? In this article we’ll dive in Lee’s Famous Recipe Chicken and its profitability, how much it really costs and whether you should invest in this franchise. Let’s dive in!

Key stats

Franchise fee$35,000
Royalty fee4% to 6%
Marketing fee5% to 7%
Investment (mid-point)$899,000
Average sales$1,541,000
Sales to investment ration.a.
Payback period*[franchise_value_investment_payback]
Minimum net worth$500,000
Minimum liquid capital$350,000
Source: Franchise Disclosure Document 2022

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About Lee’s Famous Recipe Chicken

Lee’s Famous Recipe Chicken is an American casual dining chain restaurant best known for its home-style chicken, biscuits, and other complimentary items.

The chain was founded in 1966 by Lee Cummings and Harold Omer as a “Harold-Take-Home” restaurant in Lima, Ohio, where Cummings first introduced his famous chicken recipe.

Lee’s Famous Recipe Chicken began franchising in 1967 and today has over 130 stores in the US. It is now a subsidiary of Artemis Restaurant Corp., headquartered in Shalimar, Florida.

Lee’s Famous franchises: pros and cons

Pros

  • Management training: The brand provides its franchisee with a comprehensive training program to learn about the brand’s products and procedures, restaurant operations, and success tips. Its initial training program consists of 466 hours of on-the-job training and 18 hours of classroom training.
  • Exclusive territory: The franchisor grants its franchisees the right to operate their restaurant in an exclusive development market, usually within a mile radius of the franchise. It does not grant any other franchises or operate competing restaurants in the agreed-upon area.
  • Ongoing support and grand opening: The franchisor helps its franchisees to carry out a successful grand opening and provides ongoing support and training. This includes meetings and conventions, safety and security procedures, timely communication of new product rollouts, new procedural changes, and field operations.
  • Site selection and construction: Franchisees have access to experienced and qualified real estate experts. They get assistance in identifying a convenient restaurant location in terms of traffic and demographic patterns. Also, the brand helps its franchisees with design, plan specifications, restaurant construction, and lease negotiations.

Cons

  • Not a passive investment: The brand does not allow for absentee ownership by its franchisees. Franchisees are required to be fully involved in the decision-making and daily operations of their restaurants.
  • Not a part-time business. Lee’s Famous Recipe Chicken cannot be operated on a part-time basis. The restaurants must be open as per the parent company’s operating hours.
  • No financing: The franchisor does not directly or indirectly finance its franchisees for start-up costs, inventory, equipment, or development expenses.
  • Competition: The franchise faces competition from leading chicken brands such as Chick-fil-A, KFC, Church’s Chicken, Golden Chick or even Buffalo Wild Wings

How much does a Lee’s Famous franchise cost?

You would need to invest around $855,000 to open a Lee’s Famous Recipe Chicken restaurant on average.

The exact amount you would need to invest depends on the type of restaurant you choose. For example, you would need to invest 4 times as much for a traditional restaurant than for a non-traditional restaurant.

Indeed Lee’s Famous Recipe Chicken offers 3 formats of restaurants franchisees can choose from:

  • Traditional Stand-Alone: $1,160,600 – $1,915,700
  • Streamlined Location: $428,300 – $849,200
  • Non-traditional Location: $352,400 – $747,100

The investment includes an initial franchise fee ($15,000-$20,000) that must be paid to the franchisor. In addition to the initial franchise fee, the investment covers all the startup costs you may need to start a restaurant business. Namely: 

  • Formation Costs: training fee, real estate, building and improvements, equipment, furniture, signage, pos system, utility deposits, permits, business licenses, etc.
  • Initial Marketing: grand opening advertising
  • Operating Costs: opening inventory, insurance, and working capital for first 3 months, etc.
Type of ExpenditureLowHigh
Initial Franchise Fee$20,000$20,000
Development Fee$15,000$15,000
Formation Costs$1,083,600$1,773,700
Initial Marketing$5,000$5,000
Operating Costs$37,000$102,000
Total$1,160,600$1,915,700
Source: Franchise Disclosure Document 2022

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What’s the average turnover of a Lee’s Famous restaurant?

A Lee’s Famous Recipe Chicken franchise makes $1,550,000 in turnover per year on average.

This is the annual median turnover of 121 franchised restaurants operating in 2021 in the US. Interestingly enough, 25% of the franchised restaurants made more than $2,275,000 in turnover per year (see below). Indeed, sales number per franchise is also growing:

How profitable is a Lee’s Famous franchise?

We estimate that a Lee’s Famous Recipe Chicken franchise makes $217,000 in profits per year on average. This represents a 14% EBITDA margin.

Note that Lee’s Famous Recipe Chicken doesn’t provide any detailed information about the financial performance of its franchises in its latest Franchise Disclosure Document. Instead we had to make assumptions which we have summarized below.

Profit and lossAmount% Sales
Sales$1,549,620100%
COGS$(387,405)25%
Gross Profit$1,162,21575%
Labor$(449,390)29%
Marketing and royalty costs$(170,458)11%
Occupancy$(139,466)9%
Other OpEx$(185,954)12%
EBITDA$216,94714%
Source: Franchise Disclosure Document 2022

Is a Lee’s Famous franchise a good investment?

To assess whether you should invest in a Lee’s Famous Recipe Chicken franchise, you should compare the future profits you expect to make with this business with the initial investment you would have to fund as the franchisee (from your own funds, investors or a loan e.g. a SBA loan).

This what we’re doing below:

By comparing profits to the initial investment of $855,000 we estimate that Lee’s Famous has 4 years payback which is excellent.

Think about it: it would take you only 4 years to reimburse all creditors, investors and yourself as the franchisee. Only then you can reap the profits. That’s a great investment!

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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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