Schlotzsky’s Franchise Costs $1.2M (+ 2023 AUV & Profits)
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 $1,243,000 price tag? Let’s find out!
Key stats
| Franchise fee | $35,000 |
| Royalty fee | 6.0% |
| Marketing fee | 5.0% |
| Investment (mid-point) | $1,243,000 |
| Average sales | $994,000 |
| Sales to investment ratio | 0.8x |
| Payback period | 9 years |
| Minimum net worth | $1,000,000 |
| Minimum liquid capital | $300,000 |
Schlotzsky’s Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
About Schlotzsky’s
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 $1,243,000 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 1.7x more if you choose a freestanding location over an endcap location.
In any case, the required investment amount ranges from $568,600 to $1,851,750.
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 Expenditure | Low | High |
|---|---|---|
| Initial Franchise Fee | $35,000 | $35,000 |
| Formation Costs | $1,167,750 | $1,696,950 |
| Grand Opening | $15,000 | $25,000 |
| Operating Costs | $67,000 | $94,800 |
| Total | $1,284,750 | $1,851,750 |
Schlotzsky’s Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
How much money can you make with a Schlotzsky’s franchise?
On average, a Schlotzsky’s Bakery Café franchise makes $994,000 in sales per year. That is the average for both restaurants with drive-thru and without drive-thru: a total of 248 restaurants operating in 2022.
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 39% more revenue than a non-drive-thru restaurant.
| Type of restaurant | Number of restaurants | Median Net Sales |
|---|---|---|
| With Drive-thru | 212 | $1,036,917 |
| Without Drive-thru | 36 | $743,804 |
| Total | 248 | $994,368 |
How profitable is a Schlotzsky’s franchise?
We estimate that a Schlotzsky’s Bakery Café franchise makes $139,000 in profits per year on average. That represents a 14% EBITDA margin.
Note that Schlotzsky’s 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 loss | Amount | % Sales |
|---|---|---|
| Sales | $994,368 | 100% |
| COGS | $(248,592) | 25% |
| Gross Profit | $745,776 | 75% |
| Labor | $(288,367) | 29% |
| Marketing and royalty costs | $(109,381) | 11% |
| Occupancy | $(89,493) | 9% |
| Other OpEx | $(119,324) | 12% |
| EBITDA | $139,212 | 14% |
Is a Schlotzsky’s franchise a good investment?
We estimate that it takes on average 9 years for a franchisee to recoup her/his initial investment.
That’s an average payback period, and as such a good investment. This means that you would need to wait 9 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.
Schlotzsky’s Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
Disclaimer
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