Lee’s Famous Recipe Chicken Franchise: Costs & Profits

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 even more impressive payback period of 3 years (any payback period below 4 years is considered excellent for a restaurant franchise).

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!

Lee’s Famous franchises: key figures

Franchise fee	$35,000
Royalty fee	5.0%
Marketing fee	7.0%
Investment (mid-point)	$661,000
Average sales	$1,423,000
Sales to investment ratio	2.2x
Payback period*	3 years
Minimum net worth	$500,000
Minimum liquid capital	$350,000

What is 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 $660,833 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: $922,200 – $1,283,400
• Streamlined Location: $348,500 – $678,700
• Nontraditional Location: $266,100 – $466,100

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 cost	Low	High
Initial Franchise Fee	$15,000	$20,000
Development Fee	$15,000	$15,000
Formation Costs	$199,500	$1,169,000
Initial Marketing	$5,000	$5,000
Operating Costs	$31,600	$74,400
Total	$266,100	$1,283,400

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

A Lee’s Famous Recipe Chicken franchise makes $1,422,685 in turnover per year on average.

This is the annual median turnover of 126 franchised restaurants operating in 2020 in the US. Interestingly enough, 25% of the franchised restaurants made more than $2,161,220 in turnover per year (see below). 

How profitable is a Lee’s Famous franchise?

A Lee’s Famous Recipe Chicken franchise makes $369,898 in profits per year on average. This represents a 26% profit margin (adjusted EBITDA margin).

The 26% adjusted EBITDA margin is in line compared to similar franchises as per our benchmark (~25-27% for restaurant franchises). 

Note that Lee’s Famous Recipe Chicken doesn’t provide any financial information about their franchises regarding costs. Indeed, to calculate this number we had to use the industry average for COGS (25% of sales), labor costs (29%), and rent costs (8%). 

Profit and loss	Amount	% of sales
Sales	$1,422,685	100%
COGS	$(355,671)	25.0%*
Labor	$(412,579)	29.0%*
Rent	$(113,815)	8.0%*
Royalty + marketing fees	$(170,722)	12.0%
Adjusted EBITDA	$369,898	~26%

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 net profits (assuming 15% of revenues which makes sense given EBITDA is at 26%) to the investment of $660,833 we found a payback period of 3.1 years which is excellent.

Think about it: it would take you only 3 years to reimburse all creditors, investors and yourself as the franchisee. Only then you can reap the profits. That’s a great investment!

If you’re considering buying a Lee’s Famous Recipe Chicken, we can help. Download our pre-built business plan below including a 5-year financial model with all reports investors and banks ask for (break-even point, payback period, return on investment and more).

How does it compare vs. other franchises?