With a hefty initial franchise fee of $50,000 and a total investment of over $1 million on average, Popeyes isn’t the most affordable franchise opportunity. Yet, with average annual sales of $1.4 million, does Popeyes’ financials justify its price?
That’s something we’ll look into in this article. More especially we’ll have a look at whether it makes sense to open a Popeyes franchise in light of its cost and its profits. Let’s dive in!
Popeyes: key figures
|Average annual sales||$1,444,617|
|Sales to investment ratio||1.3x|
|Investment payback*||5.1 years (good)|
|Minimum net worth||$1,000,000|
|Minimum liquid capital||$500,000|
Popeyes franchises: an introduction
Popeyes is an American multinational fast food chain restaurant specializing in fried chicken. Apart from fried chicken, Popeyes sells fried chicken, seafood, Cajun cuisine, vegetables, and biscuits.
The company was established in 1972 and today, it operates in 46 US states, Puerto Rico, District of Columbia, and 30 other countries.
Of the 3,705 restaurants operating globally, only about 50 of them are company-owned and the rest are franchised.
Popeyes franchises: pros and cons
Buying a Popeyes franchise comes with various advantages and disadvantages, and they include:
- Popeyes is a reputed brand and hence, it won’t be difficult to attract new customers
- The company offers limited territory guarantee
- Franchisors get access to detailed training
- The company allows owning multiple franchisee stores
- Popeyes has a high franchise fee of $50,000 in addition to $1 million net worth per restaurant of which $500,000 must be in liquid assets
- The royalty fee of 5% is also high and there is a recurring 4% fee for advertisement
- Limited territory guarantee means that Popeyes can reduce the protected or guaranteed territory to less than 1 mile radius. This can eat into your profits
How much does it cost to start a Popeyes franchise?
You need to invest $1,095,783 to open a Popeyes franchise. This amount also includes the initial franchise fee of $50,000.
Yet, this number is just an average. The investment amount varies depending on many factors like location, the format of the restaurant, etc. For example, as per the latest FDD, opening a free-standing restaurant is far more costly than a delivery restaurant:
|Type of restaurant||Lowest||Highest||Average|
The initial investment covers all type of expenses a fast-food restaurant would incur in the beginning. For example, costs of building, site work, technology, initial training, opening supplies, insurance, business licenses, and additional funds for bearing the losses of the first 3 months, etc.
Here’s a summary of the different costs you should pay for:
|Format of restaurant||Free standing||In-line||Delivery|
|Initial franchise fee||$50,000||$50,000||$2,500|
|Formation costs||$330,000 – $3,374,200||$290,200 – $1,236,200||$95,700 – $704,200|
|Operating expenses||$43,800 – $121,600||$43,300 – $76,600||$11,300 – $42,600|
|Total||$423,800 – $3,545,800||$383,500 – $1,362,800||$109,500 – $749,300|
What is the turnover of a Popeyes franchise?
On average, a Popeyes franchise makes $4,227,417 in sales per year. This amount is the average of all Popeyes’ 2,277 restaurants annual median sales.
Of course, the number can change depending on the type of restaurant. For example, a free-standing or in-line restaurant generates more revenue than a food court restaurant:
|Restaurant format||Number of Restaurant||Median Sales|
How profitable is a Popeyes franchise?
The good thing with Popeyes is that their FDD is actually more detailed vs. most other franchise disclosure documents. Therefore, we can easily assess the profitability of a Popeyes franchise by looking at the financials disclosed in the FDD.
As per our analysis we found out Popeyes franchises have an adjusted EBITDA margin of 23% on average (see our calculation below). This adjusted EBITDA includes COGS, rent, labor costs and royalty and marketing fees.
|Profit-and-loss||Amount ($)||As % of sales|
|Royalty + marketing fees||$(144,462)||10%|
Is a Popeyes franchise a good investment?
Even though we can assess the adjusted EBITDA margin for a Popeyes franchise, it doesn’t tell us much about the net profit margin: the profitability of a business after all expenses have been taken into account.
Like for the vast majority of franchises, Popeyes simply doesn’t disclose any information when it comes to net profit. Therefore we have to estimate it instead using an average 15% net profit margin.
In addition to a good investment to sales ratio of 1.3x, the payback period for a Popeyes franchise is also good: 5 years on average.
Indeed, it takes on average franchisees and their investors 5 years to recoup their original investment of $1,095,783, that’s in line with other similar restaurant franchises.
Download the Popeyes business plan and get your franchise funded
Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers