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How Profitable are Schlotzsky’s Franchises? Costs & Profits (2023)

Another big franchise of the Focus Brands family, Schlotzsky’s Bakery Café has over 330 in the US today. If you’re considering investing in a Schlotzsky’s franchise, you may want to know how profitable this franchise really is. That’s what we look at in this article.

As you know, all franchises are required to disclose certain information in their Franchise Disclosure Document. In this article we’re looking into this document to find answers to questions like: how much revenue can you make with a Schlotzsky’s restaurant? How profitable is it really?

More importantly, we’ll look at whether you should invest in a Schlotzsky’s franchise yourself: is this worth the $1,102,933 price tag? Let’s find out!

Schlotzsky’s: key figures

Franchise fee$35,000
Royalty fee6.0%
Marketing fee5.0%
Investment (mid-point)$1,102,933
Median annual sales$1,053,333
Sales to investment ratio1.0x
Investment payback*7.0 years (average)
Minimum net worth$1,000,000
Minimum liquid capital$300,000
* using 15% net profit margin

🔎 How does Schlotzsky’s compare vs. other franchises? Check the ranking

Schlotzsky’s: a brief introduction

Schlotzsky’s Bakery Café is an American fast-casual restaurant chain that is owned by Focus Brands along with Auntie Anne’s, Jamba’s, Moe’s Southwest Grill, Cinnabon, Carvels, and McAlister’s Deli.

The chain was founded in 1971 by Don and Dolores Dissman in Austin, Texas.

It specializes in pizza, sandwiches, salads, calzones, soups, and other related foods and beverages. Headquartered in Atlanta, Georgia, Schlotzsky’s Bakery Café began franchising in 1976. Today, it has over 330 locations in the US.

Schlotzsky’s franchises pros and cons

Pros

  • Real estate and construction: The brand provides its franchisees with experienced real estate support. Franchisees get valuable real estate advice on convenient business locations, restaurant design, and construction. It also helps them with securing and negotiating better leases to lower the cost of development and improve their bottom lines.
  • Comprehensive training: The franchisor provides its franchisees with a two-week hands-on training to provide them with a solid foundation and help them understand the business concept and processes
  • Multiple income channels: The brand offers its franchisees flexible franchise formats to choose from. Franchisees have the opportunity to make the most out of the available real estate opportunities in their locations. Also, franchisees can maximize their earning potential with formats such as dine-in, take-out, drive-thru, online ordering, and catering.
  • Marketing strategy: Schlotzsky’s Bakery Café has a dedicated and established marketing strategy. In addition to a popular brand name, franchisees can leverage targeted local store marketing planning and execution to create awareness and take their products to a wider customer base.
  • Exclusive territory protection: The franchisor grants its franchisees a protected exclusive territory to operate their restaurants. As long as the agreement is in place, the franchisor does not allow other franchises or itself to operate other competitive restaurants in the protected area.
  • Purchasing power: The brand has a universal supply chain. Franchisees can leverage the brand’s popularity, establish better vendor relationships, and enjoy economies of scale. They can also order online at lower commercial rates.

Cons

  • No financial assistance: The brand does not directly or indirectly finance its franchisees. It also does not guarantee any lease, note, or grant on behalf of any franchisee.
  • No absentee ownership: The Schlotzsky’s Bakery Café franchise does not offer a passive investment opportunity. Instead it requires franchisees to be fully involved in the day-to-day operations of their restaurants.
  • Not a part-time business: The business is not a part-time investment. Franchisees must be open full-time as per the parent company’s schedule.
  • Competition: Schlotzsky’s Bakery Café franchise operates in a competitive industry with big names such as Penn Station East Coast Subs, Subway, Jimmy John’s, and Arby’s.

How much does a Schlotzsky’s franchise really cost?

On average, you may need to invest around $1,102,933 to open a Schlotzsky’s Bakery Café franchise.

As the investment amount is an average of both endcape and freestanding location restaurants, it may change depending on your choice of location. For example, you would need to invest 1.6x more if you choose a freestanding location over an endcap location.

In any case, the required investment amount ranges from $522,570 to $1,635,380.

Why would you pay this amount to the franchisor at the beginning? Well, the initial investment covers all types of startup costs you would need to open a restaurant. In addition to the initial franchise fee of $35,000, the investment also covers:

  • Formation costs: construction costs, permitting, equipment package, millwork, furniture, menu board, graphics & interior signage, exterior signage, computer, tv/music, architect/engineer, legal & accounting fees, security deposits, etc. 
  • Grand opening: grand opening marketing
  • Operating costs: rent, office supplies, insurance, opening inventory, working capital for the first 3 months, etc.
Type of costLowHigh
Initial Franchise Fee$35,000$35,000
Formation Costs$990,000$1,480,580
Grand Opening$15,000$25,000
Operating Costs$67,000$94,800
Total$1,107,000$1,635,380
Source: 2022 Franchise Disclosure Document

How much money can you make with a Schlotzsky’s franchise?

On average, a Schlotzsky’s Bakery Café franchise makes $1,053,333 in sales per year. That is the average for both restaurants with drive-thru and without drive-thru: a total of 226 restaurants operating in 2021.

As the sales number is an average, it may change depending on various conditions like the type of restaurant, location, competition from similar restaurants, etc. As you can see, a drive-thru restaurant generates 33% more revenue than a non-drive-thru restaurant. 

Type of restaurantNumber of restaurantsMedian Net Sales
With Drive-thru189$1,053,333
Without Drive-thru37$790,283
Total226$1,010,267
Source: 2022 Franchise Disclosure Document

How profitable is a Schlotzsky’s franchise?

On average, a Schlotzsky’s Bakery Café franchise makes $278,667 in profits per year. That represents a 26% profit margin (adjusted EBITDA to be exact). 

The 26% adjusted EBITDA margin is in line compared to similar franchises as per our intelligence (~25-27% industry average). 

Note that Schlotzsky’s Bakery Café doesn’t provide any financial information on costs. Indeed, we had to use the industry average for COGS (25% sales) and labor costs (29%) to calculate the adjusted EBITDA.

Profit-and-lossAmount ($)As % of sales
Sales$1,053,333100%
COGS$(263,333)25.0%*
Labor$(305,467)29.0%*
Rent$(90,000)8.5%
Royalty + marketing fees$(115,867)11.0%
Adjusted EBITDA$278,667~26%
* industry average

Okay, now what does the adjusted EBITDA mean? Well, you may assume that this margin is equivalent to the net profit of your business. Well, not really. This margin is not the same as the net profit or net income, which means you would earn less than 26% net profit. Indeed, you may need to deduct taxes, debt interest expenses, and other costs from this margin. 

Is a Schlotzsky’s franchise a good investment?

We found it takes on average 7 years for a franchisee to recoup her/his initial investment (the $1,102,933): that’s an average payback period, and as such a good investment.

This means that you would need to wait 7 years for the profits to reimburse your initial investment, whether this investment is either funded with equity (yours or investors) or debt (like a SBA loan).

The payback period is the number of years it takes for an investment to repay itself with the future profits. For profits, we use here net profits (assumed to be 15% of sales).

Are you considering investing in a Schlotzsky’s franchise? Download our business plan below and get your business funded with a pre-built 5-year financial plan and all the metrics investors are asking for (breakeven point, return on investment, payback, etc.)

Schlotzsky’s business plan

Download the Schlotzsky’s franchise business plan and get your franchise funded

Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers

How does it compare vs. other franchises?

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Auntie Anne'shttps://sharpsheets.io/blog/auntie-annes-franchise-costs-profits/Pretzels229,692343,1351.55.6300,000100,000
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Tim Hortonshttps://sharpsheets.io/blog/tim-hortons-franchises-costs-profits/Coffee1,242,7501,188,2401.07.0500,000100,000
Checkers & Rally'shttps://sharpsheets.io/blog/checkers-franchises-profits-sales-costs/Burger837,8471,039,7731.25.4750,000250,000
Charleys Philly Steakshttps://sharpsheets.io/blog/charleys-philly-steaks-costs-profits/Sandwich509,806786,2331.54.3500,000100,000
Buffalo Wild Wingshttps://sharpsheets.io/blog/buffalo-wild-wings-costs-profits/Chicken3,546,9002,534,1480.79.31,500,000750,000
Rita's Icehttps://sharpsheets.io/blog/ritas-ice-franchise-costs-profits/Ice Cream215,839248,3401.25.8300,000100,000
A&W Restaurantshttps://sharpsheets.io/blog/aw-restaurants-franchises-costs-profits/Burger786,750851,2121.16.2350,000150,000
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Bojangleshttps://sharpsheets.io/blog/bojangles-franchise-costs-profits/Chicken1,658,0001,801,0571.16.11,000,000500,000
McAlister’s Delihttps://sharpsheets.io/blog/mcalister-deli-franchise-costs-profits/Sandwich1,424,9631,865,8611.35.11,000,000500,000
Round Table Pizzahttps://sharpsheets.io/blog/round-table-pizza-franchise-costs-profits/Pizza783,2501,037,8161.35.0500,000200,000
Qdoba Mexican Eatshttps://sharpsheets.io/blog/qdoba-mexican-eats-franchise-costs-profits/Mexican659,250972,9621.54.5
Freddy’shttps://sharpsheets.io/blog/freddys-franchise-costs-profits/Burger1,453,0401,792,9291.25.41,000,000400,000
Taco John’shttps://sharpsheets.io/blog/taco-johns-franchise-costs-profits/Mexican1,119,0001,124,9801.06.61,000,000400,000
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Einstein Bros. Bagelshttps://sharpsheets.io/blog/einstein-bros-bagels-franchise-costs-profits/Sandwich750,075885,0111.25.71,000,000536,500
Great American Cookieshttps://sharpsheets.io/blog/great-american-cookies-franchise-costs-profits/Sweets385,275452,7711.25.7250,000100,000
Wienerschnitzelhttps://sharpsheets.io/blog/wienerschnitzel-franchise-costs-profits/Hot dogs873,300880,9801.06.6600,000250,000
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Wetzel's Pretzelshttps://sharpsheets.io/blog/wetzels-pretzels-franchise-costs-profits/Pretzels377,571748,8572.03.4300,00050,000
Pizza Ranchhttps://sharpsheets.io/blog/pizza-ranch-franchise-costs-profits/Pizza3,268,3001,174,0880.418.61,000,000297,000
Del Tacohttps://sharpsheets.io/blog/del-taco-franchise-costs-profits/Mexican1,406,8501,345,3411.07.02,000,000500,000
Schlotzsky’shttps://sharpsheets.io/blog/schlotzskys-franchises-costs-profits/Healthy, Salads1,102,9331,053,3330.322.21,000,000300,000
Captain D’shttps://sharpsheets.io/blog/captain-ds-franchise-profits-costs/Seafood982,7781,067,8160.419.01,000,000350,000
Biggby Coffeehttps://sharpsheets.io/blog/biggby-coffee-franchise-profits-costs/Coffee310,575648,3520.320.0300,000100,000
Which Wichhttps://sharpsheets.io/blog/which-wich-franchises-profits-costs/Sandwich330,375281,8860.322.2500,000150,000
Marble Slab Creameryhttps://sharpsheets.io/blog/marble-slab-franchises-costs-profits/Ice Cream407,360251,0520.416.7250,000100,000
Mountain Mike's Pizzahttps://sharpsheets.io/blog/mountain-mikes-franchise-profits-costs/Pizza410,900865,7130.320.0300,000100,000
Huddle Househttps://sharpsheets.io/blog/huddle-house-franchise-cost-profits/Diner988,743712,4280.513.3600,000300,000
L&L Hawaiian Barbecuehttps://sharpsheets.io/blog/ll-hawaiian-barbecue-franchises-costs-profits/BBQ334,350612,9210.333.3500,000150,000
Chicken Salad Chickhttps://sharpsheets.io/blog/chicken-salad-chick-franchises-costs-profits/Healthy, Salads651,0001,202,0200.320.0750,000250,000
Golden Chickhttps://sharpsheets.io/blog/golden-chick-franchises-costs-profits/Chicken362,975917,6092.52.62,000,000425,000
Perkinshttps://sharpsheets.io/blog/perkins-franchise-costs-profits/Diner1,922,7281,729,2460.97.41,500,000500,000
Waba Grillhttps://sharpsheets.io/blog/waba-grill-franchises-costs-profits/Teryaki454,000466,5361.06.51,000,000250,000
Bruster’s Ice Creamhttps://sharpsheets.io/blog/brusters-franchises-profits-costs/Ice Cream663,925466,6960.79.5375,000150,000