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Little Caesars Franchise Costs $1M Yet Make $800K (2023)

This article was updated with the 2023 Franchise Disclosure Document

With more than 4,000 restaurants in the US alone, Little Caesars is undeniably one of the largest pizza franchises globally. So if you’re looking to get into the pizza industry, Little Caesars is an obvious franchise to choose as a franchisee.

But with an initial investment of $1,023,000 and $798,000 yearly sales, is starting a Little Caesars franchise a good investment? Is this a profitable business?

In this article, we’ll look into the financial aspects of starting a Little Caesars’ franchise: does it really justify the hefty cost?

More specifically, we’ll look into how much it costs to start a Little Caesars franchise and how much sales you can make with this business. More importantly, we’ll see how profitable this franchise really is. Let’s dive in!

a financial plan for a franchise
a financial plan for a franchise

Little Caesars franchise: a brief introduction

Headquartered in Detroit, Michigan, Little Caesars is a leading American multinational pizza chain with stores in each of the 50 states in the US and 27 countries worldwide.

Founded by Mike Ilitch and his wife Marian Ilitch as a single-family restaurant business in 1959, Little Caesars is the third pizza company after Pizza Hut and Domino’s Pizza nowadays.

On top of its exotic pizza toppings, Little Caesars offers bread, cheese, dips, sauces, and other foods such as fish, hotdogs, chicken wings, and shrimp.

Little Caesars’ franchise journey started in 1962 under Little Caesars Enterprises Inc., owned by Ilitch Holdings. In Michigan, the first franchise was called Little Caesars Pizza Treat.

At the beginning of 2022, Little Caesars had over 5,300 stores worldwide, with 4,181 stores in the US and locations in over 27 countries.

Little Caesars franchise: pros and cons

The pros

The Little Caesars franchise business presents some strong benefits. These are:

  • Comprehensive training and support: Little Caesars offers their new franchisees thorough training and support to run their ventures successfully. They have some of the best experts in the fields of real estate and chain management. So, even if you have little or no experience at all, you can still apply and become a successful Little Caesars franchisee
  • Low-priced pizza: One of Little Caesars’ selling points is its low prices. For instance, the introduction of its $5 big pizza in 2005 was a great success. Since then many customers have associated Little Caesars with affordable fast food
  • Brand Popularity: with 5,300 stores worldwide, the Little Caesars brand is highly recognized globally. As a new franchise, you will benefit from customer awareness to attract customers 
  • Territory protection: As a new franchisee, you can have peace of mind knowing no other Little Caesars store will pop up near your location. Indeed, Little Caesars avoids having multiple stores within the same location that would create cannibalization
  • Family oriented: Little Caesars’ franchise model aligns with the family setup since it started as a family business. In recent years, it has supported family franchises in the U.S. by offering them financial incentives such as discounts on franchise fees, equipment, and financing assistance. As a result, it is a good fit if you want to run the franchise as a family business
  • Wide selection of menu items: Today, Little Caesars has established a large pool of menu items. From their famous exotic pizza toppings to their crazy bread and a variety of other high-quality fast-food options. This helps new franchises position themselves strategically and compete with established brands 

The cons

Operating a Little Caesars franchise still comes with its drawbacks such as:

  • Competition: As more people continue to demand quality and affordable pizzas, Little Caesars continues to face stiff competition. To name a few, Domino’s and Pizza Hut are strong competitors. This calls for significant marketing efforts and expenses
  • High startup costs: The cost of applying for a Little Caesars franchise, such as franchise fees and restaurant costs, can be high (see more on that later). Most franchisees resort to bank loans (e.g. SBA loans) to finance the initial investment, which may be hard to get

How much it costs to open a Little Caesars franchise?

In addition to a $20,000 initial franchise fee, the investment cost to open a a Little Caesars varies between $393,000 to $1,718,700.

To clarify, this is the amount you as a franchisee would have to pay for (either by raising funds from investors or from a bank).

This amount will cover part of the total startup costs to build and equip a Little Caesars franchise. The rest will come from the franchisor. The amount includes construction and/or renovation costs, fixtures, equipment, furniture, startup inventory, training expenses etc. Here’s the full breakdown:

Type of ExpenditureAmount
Initial franchise fee$20,000
Leasehold improvements (construction and renovation costs)$50,000 – $1,000,000
Fixtures, equipment, signage$212,000 – $424,000
Grand opening marketing$15,000 – $20,000
Startup inventory$63,000 – $154,000
Other expenses$33,000 – $100,700
Total investment$393,000 – $1,718,700
Source: Franchise Disclosure Document 2023
a financial plan for a franchise
a financial plan for a franchise

What’s the average turnover for a Little Caesars franchise?

The average annual sales for a Little Caesars franchise is $798,000 as of 2021.

Note that this number is an estimation we calculated using Little Caesars’ total franchise revenue of $4.23 billion in 2021 which we divided by the number of locations (5,300 stores as of December 2022), taking into account the fact that 90% of the stores are company-owned.

Indeed, unfortunately Little Caesars doesn’t provide any financial data in its FDD when it comes to revenues and profit margins for its restaurants.

How profitable is a Little Caesars franchise?

We estimate that the average Little Caesars franchise makes $128,000 in profits per year (16% EBITDA margin).

Note that Little Caesars 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$798,113100%
COGS$(199,528)25%
Gross Profit$598,58575%
Labor$(231,453)29%
Royalty fee$(47,887)6%
Marketing fee$(55,868)7%
Occupancy$(39,906)5%
Other OpEx$(95,774)12%
EBITDA$127,69816%
Sources: Estimates

Is a Little Caesars franchise a good investment?

With a 16% EBITDA margin, we can say that Little Caesars franchises are profitable businesses. Yet, it doesn’t tell us anything about whether you should invest in one. In other words: are Little Caesars good investments?

We estimate that Little Caesars franchises have a payback period of 9 years, which is average. In other words, it would take you 9 years on average to recoup your initial investment.

Yet, keep in mind this payback period is calculated based on our estimation of the average performance of the 5,300 Little Caesars restaurants. Moreover, we had to make assumptions for profits (see above). Therefore, a new franchised restaurant may perform better than our estimates here.

a financial plan for a franchise
a financial plan for a franchise

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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