Pretzelmaker: an Affordable and Profitable Franchise (2023)

Pretzelmaker franchises key figures

Franchise fee	$20,000
Royalty fee	7.0%
Marketing fee	3.5%
Investment (mid-point)	$261,000
Average sales	$226,000
Sales to investment ratio	0.9x
Payback period*	8 years
Minimum net worth	$250,000
Minimum liquid capital	$100,000

What is Pretzelmaker?

Pretzelmaker is a Georgia-based restaurant chain that serves hand-rolled pretzels, cold beverages, and smoothies. It is a subsidiary of FAT brands, founded in 1991 by Jeffery Tripp.

Pretzelmaker’s menu includes soft pretzel bites, mini pretzel dogs, dipping sauces, blended drinks, lemonades, and mozzarella stuffed bites. 

The first ever Pretzelmaker store was launched in 1991 in Trumbull, Connecticut, and incorporated as Mr. Pretzel Inc. 

It started franchising in 1992 as its popularity increased, ultimately changing its name to Pretzel Time and, later, Pretzelmaker. Today, the quick service restaurant has 280 stores in the US and other global locations such as Canada, Mexico, Saudi Arabia, and Guam.

Pretzelmaker franchises pros and cons

Pros

• Flexible business model: Pretzelmaker allows franchisees to choose the most suitable store model depending on their preferences. The flexible business model allows franchisees to sell soft pretzels from virtually any location. Traditional (for example, a small store in a shopping mall) and non-traditional (for example, a kiosk-sized store in an airport) franchising models ensure franchisees only choose what’s best for their target market. 
• Modern supply chain: the franchisor offers a modern, well-coordinated, and built-in supply chain to reduce costs and maximize efficiency. 
• An expansive corporate network for comprehensive support: the franchisor has a complete support system to help brand owners launch their stores from the ground. The investment journey starts from the pre-opening phase and won’t end until the restaurant owner has opened a successful franchise. 
• Training: Pretzelmaker offers quality training to help franchisees learn the basics of restaurant management. Franchisees must complete the food training course and at least 3 days of on-the-job training to satisfy the franchisor’s requirements for opening a franchise. The franchisor may schedule an advanced training program if they deem it fit. 

Cons

• Full-time investment: store owners can’t run the business part-time. Franchisees must devote their time, skills, and effort to running the business. 
• No exclusive territory: the franchisor doesn’t grant restaurant owners exclusive territories. Franchisees may compete for clients with other brands operating in the same area. 
• No financial assistance: the franchisor doesn’t provide direct or indirect financing. It doesn’t arrange for any third-party funding and has no intention to sell, assign, or source any part of the financial arrangement to its affiliates. 
• No absentee ownership: the franchisor expects restaurant owners to be actively involved in all the practical aspects of the business operation from physical locations. 
• No part-time operations: Pretzelmaker doesn’t allow passive or part-time business operations. Franchisees must demonstrate a solid commitment to running the franchise as a full-time investment, operating within the specified working hours.
• Competition: despite its strong brand appeal, Pretzelmaker is rivaled by other competitive pretzels brands such as Wetzel’s Pretzels and Auntie Anne’s

How much does a Pretzelmaker franchise cost?

You would have to invest on average $261,100 to open a new Pretzelmaker franchise restaurant.

This is the investment required for a single store, which is either a traditional store or a non-traditional store. Indeed, the vast majority of stores are traditional (156 out of the 161 total franchised restaurants).

To clarify, there are 2 kinds of formats of restaurants you can choose: the Single store, and Satellite location. 

Here’s the full breakdown of costs per restaurant format:

Single store

Type of cost	Amount
Franchise fee	$15,000 – $25,000
Furniture, fixtures and equipment	$65,000 – $90,000
Leasehold improvements	$85,000 – $140,000
Professional fees	$1,000 – $6,000
3 months working capital	$8,000 – $12,000
Other	$26,200 – $49,000
Total	$200,200 – $322,000

Satellite location

Type of cost	Amount
Franchise fee	$5,000
Furniture, fixtures and equipment	$25,600-$48,000
Professional fees	$1,000 – $6,000
3 months working capital	$1,000 – $5,000
Other	$63,400 – $129,394
Total	$96,000 – $193,394

How much sales does a Pretzelmaker franchise make?

On average, a Pretzelmaker franchise makes $226,435 in sales per year. 

This is the average sales per traditional store for the 156 of the 161 franchised stores that were open for all of 2020.

How profitable is a Pretzelmaker franchise?

On average, a Pretzelmaker franchise makes $57,884 profits per year. This corresponds to a 26% profit margin (adjusted EBITDA margin).

Pretzelmaker is a profitable franchise. We calculated this number using the information available in the Franchise Disclosure Document 2021.

Unfortunately, Pretzelmaker has not provided detailed information on the cost of goods sold (COGS), and labor costs. Therefore, we used 25% and 29% of sales respectively, as per industry benchmarks.

Profit and loss	Amount	% sales
Sales	$226,435	100%
COGS	($56,609)	25.0%*
Labor	($65,666)	29.0%*
Rent	($22,500)	10.0%
Royalty + marketing fees	($23,776)	10.5%
Adjusted EBITDA	$57,884	~26.0%

Is a Pretzelmaker franchise a good investment?

We estimate the payback period for a Pretzelmaker franchise to be 7.7 years, assuming a 15% net profit margin. This means you would need to wait 7.7 years for the future profits to repay the startup costs of $261,100.

Whilst not necessarily excellent, it’s a payback period on the higher end of the average we found for restaurant franchises (5 to 6 years on average). Therefore it’s not necessarily the best investment and it’s not as good as Wetzel’s Pretzels for example with a payback period of 3.4 years.

Yet, keep in mind that your decision should not be limited to financials. Factors like training, brand name, competition and others should also be taken into account when choosing your franchise.

How does it compare vs. other restaurant franchises?