McAlister’s Deli Franchise Costs (+2023 AUV & Profits)

One of the most popular deli franchise brand, McAlister’s Deli has over 500 restaurants across the US. If you’re considering buying a McAlister’s Deli franchise, you must first look into the financials.

In other words, you need to know how much it costs and how much profits you can make with this business. Luckily, as you may be already aware, you can this information in the latest Franchise Disclosure Document. This is what we’re looking into here in this article.

Indeed, with an average initial investment of $1,247,000, you would need to commit a significant amount of money before you can even do business.

On the flip side, we found that McAlister’s Deli restaurants make on average $1,865,861 in sales per year, which leads to believe this may be a good investment. Is this really? Let’s find out!

Key stats

Franchise fee*$35,500
Royalty fee5.0%
Marketing fee3.0%
Investment (mid-point)$1,247,000
Average sales$1,816,000
Sales to investment ratio1.5x
Payback period[franchise_value_investment_payback]
Minimum net worth$1,000,000
Minimum liquid capital$500,000
* $15,000 for Express restaurants
Source: Franchise Disclosure Document 2023

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About McAlister’s Deli

McAlister’s Deli is an American chain of fast food restaurants owned by the Focus Brands Group, along with Jamba’s, Cinnabon, Moe’s Southwest Grill, Auntie Anne’s, Carvel, and Schlotzky’s.

The chain was founded in Oxford, Mississippi, in 1989 by Dr. Don Newcomb. It started as Checkers before later changing to McAlister’s.

Its menu includes deli sandwiches, baked potatoes, soup, salads, desserts, catering items, and the famous sweet McAlister’s tea.

McAlister’s Deli began franchising in 1994 and is headquartered in Atlanta, Georgia. Today, the chain has over 500 stores in 28 US states and is still growing.

McAlister’s Deli franchise pros and cons

Pros

  • Comprehensive training: The brand has a comprehensive training program to equip franchisees with hands-on experience on its menu, operation standards, and customer hospitality. Its current training program is about 5 to 6 weeks of classroom training, the opening of the restaurant, and ongoing sessions of conferences, convention programs, webinars, teleconferences, or training sessions on any matters related to the system.
  • Exclusive territory: The franchisor provides franchisees with a protected, exclusive territory in which to operate their restaurant. Under the franchise agreement, the brand does not grant any other franchises or operate competitive restaurants in the protected area except in “captive audience” locations.
  • Solid franchise support: The brand offers franchisees dedicated business support and consultations to help them run their restaurants smoothly and improve their bottom line. This is through online support, proprietary software, security and safety procedures, and field operations.
  • Real estate and construction assistance: To assist franchisees in building their restaurants, the brand offers expert advice on real estate and lease negotiations. It also helps them with convenient business location assessment, site selection, restaurant design, and construction.
  • Marketing support: The brand has aggressive marketing planning and execution strategies. Franchisees can achieve national and local store growth by utilizing the brand’s national media, regional advertising, social media, loyalty program app, and localized marketing plans and campaigns.
  • Multiple income streams: McAlister’s Deli employs flexible ways for customers to enjoy their meals. Franchisees use dine-in, take-out, catering, online ordering, and a pick-up window to add to their income streams.

Cons

  • No financing: McAlister’s Deli does not provide franchisees financing for the franchise fee, trade fixtures, or other costs, directly or indirectly. It also does not guarantee any lease, obligation, or note on behalf of franchisees.
  • Competition: With changing healthy eating options, the brand faces competition from established brands like Panera Bread, Quiznos or even Jimmy John’s to name a few
  • Not a passive investment: The franchise does not offer a passive investment opportunity. The franchisees are required to fully participate in the operations of their restaurants and keep them open full-time.

McAlister’s Deli franchise: how much does it really cost?

You would have to invest on average $1,247,000 to open a new McAlister’s Deli franchise restaurant.

This is the average investment for a traditional restaurant and an express restaurant. Indeed, there are 2 kinds of formats of restaurants you can choose:

  • Traditional restaurant is a full-size restaurant that offers a full line of menu items. It can either be freestanding or at an endcap or in-line shopping center
  • Express restaurant are instead located at a non-traditional location and may offer a limited menu list of items unlike traditional restaurants

Here’s the full breakdown of costs you may expect for the 3 different types of restaurants (with low and high investment costs):

McAlister’s Deli traditional restaurant

Type of ExpenditureEndcap / In-lineFreestanding
Build out costs$385,000 – $620,000$920,000 – $1,360,000
Initial franchise fee$35,500 – $35,500$35,500 – $35,500
Computer system$32,000 – $66,500$32,000 – $66,500
Equipment $155,000 – $185,000$165,000 – $178,300
Additional funds $25,000 – $50,000$25,000 – $50,000
Other$188,500 – $351,850$205,050-$497,150
Total$921,450 – $1,565,900$1,328,050 – $2,329,400
Source: 2023 Franchise Disclosure Document

McAlister’s Deli Express restaurant

Type of ExpenditureFreestanding
Build out costs$175,000 – 255,000
Initial franchise fee$15,500
Computer system$21,000 – $56,500
Equipment $67,450 – $106,500
Additional funds $5,000 – $10,000
Other$109,550 – $192,700
Total$436,850 – $898,050
Source: 2023 Franchise Disclosure Document

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How much can you make with a McAlister’s Deli franchise?

On average, a McAlister’s Deli’ franchise makes $1,816,000 in sales per year. This represents the average sales for 431 traditional restaurant operating for all weeks in 2022.

The lowest performing restaurant made $1,226,594 in turnover vs. $2,716,185 for the most successful. Here’s a breakdown of the 431 franchised-owned traditional restaurants by quartile:

How profitable is a McAlister’s Deli franchise?

We estimate that McAlister’s Deli franchised restaurant makes $309,000 in profits per year on average. This corresponds to a 17% EBITDA margin.

Note that McAlister’s Deli 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$1,816,195100%
COGS$(454,049)25%
Gross Profit$1,362,14675%
Labor$(526,697)29%
Marketing and royalty costs$(145,296)8%
Occupancy$(163,458)9%
Other OpEx$(217,943)12%
EBITDA$308,75317%
Source: Franchise Disclosure Document 2022

Is a McAlister’s Deli franchise a good investment?

To find out whether buying a McAlister’s Deli franchise is a good investment, we need to figure out whether the profits are worth the cost.

We estimate that, on average, a Mc Alister’s Deli franchise has a 5 years payback.

We found that by comparing profits to the initial investment ($1,247,000 on average) it takes on average 5 years to reimburse your investment: that’s a good payback period and as such a good 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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