How Profitable is a Little Caesars franchise? 2022 FDD Data

Despite a strong customer awareness, with a whopping a $1,022,850 investment cost in comparison with (only) $798,000 average annual sales, starting a Little Caesars franchise may not be as good as an investment as you might think.

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!

Little Caesars franchise: key figures

Franchise fee	$20,000
Royalty fee	6.0%
Marketing fee	7.0%
Investment (mid-point)	$1,022,850
Average annual sales	$798,000
Sales to investment ratio	0.8x
Payback period*	8.5 years (mediocre)
Minimum net worth	$350,000
Minimum liquid capital	$150,000

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 franchise fee, the investment cost to open a a Little Caesars varies between $359,700 to $1,686,000. To clarify, this is the amount you as a franchisee would have to pay for.

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 cost	Amount
Initial franchise fee	$20,000
Leasehold improvements (construction and renovation costs)	$50,000 – $1,000,000
Fixtures, equipment, signage	$186,000 – $392,000
Grand opening marketing	$12,000 – $20,000
Startup inventory	$63,000 – $154,000
Other expenses	$28,700 – $120,000
Total investment	$359,700 – $1,686,000

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?

Looking at Little Caesars’ FDD numbers, we can estimate the profitability of its stores. As per our analysis, the adjusted EBITDA stands at 27% of revenues.

Adjusted EBITDA here represents the profit margin after deducting COGS, labor, rent and royalty and marketing fees. That’s in line with similar quick-service restaurants. To calculate these numbers we also used industry benchmarks for COGS and labor costs.

Profit and loss	Amount (2021)	Notes
Revenue	$798,000
COGS	$(200,000)	25%*
Labor	$(231,000)	29%*
Rent	$(51,000)	As per FDD
Royalty + marketing fees	$(104,000)	8% (as per FDD)
Adjusted EBITDA	$212,000
% margin	27%

Is a Little Caesars franchise a good investment?

With a 27% adjusted 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?

If we use a 15% net profit margin, in line with the industry, a franchisee earns on average $120,000 per year ($798,000 x 15%), not bad you might think?

Unfortunately Little Caesars aren’t great investments: whilst you earn on average $120,000 per year, you need to invest $1,022,850 upfront. This means your payback period is 8.5 years: it takes you over 8 years to recoup your initial investment, which is mediocre (anything above 7 years, 5 years is average).

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 performs better than our estimates here.

To apply for a Little Caesars franchise, download our business plan template below and access reports like your 5-year financial projections, breakeven point, return on investment and more.

How does Little Caesars compare vs. other franchises?