The Melting Pot Franchises: $2.1M AUV and a 27% Profit Margin

One of the very few fondue franchises, opening a new The Melting Pot location can be a great idea if there are no competitor in the area due to its unique menu. But is this a profitable business?

We think so: it would cost you on average $1,463,000 to open a new location (in line with most restaurant franchises) yet your restaurant could make $2,149,000 in Average Unit Volume (the average AUV for The Melting Pot franchised restaurants).

This does sound like a great investment. Indeed, we found the payback period for The Melting Pot is 4.5 years on average.

Are you convinced? In this article we will look at this fondue franchise from the perspective of its Financial Disclosure Document. We will see how much it really costs and how much profits you can realistically make with this business. Let’s find out!

The Melting Pot franchises: key figures

Franchise fee	$45,000
Royalty fee	5.0%
Marketing fee	6.0%
Investment (mid-point)	$1,463,000
Average sales	$2,149,000
Sales to investment ratio	1.5x
Payback period*	5 years
Minimum net worth	$1,500,000
Minimum liquid capital	$450,000

What is The Melting Pot?

The Melting Pot is an American chain of franchised casual dining restaurants based in Tampa, Florida.

The Melting Pot was founded in 1975 in Maitland, Florida, and served only three menu items: Swiss cheese fondue, beef fondue, and a chocolate fondue dessert. Today it also offers salads, meat entrees, chicken, pasta, and seafood.

Mark, Mike, and Bob Johnston opened The Melting Pot of Tallahassee in 1979 with permission from the owners. In 1985, they purchased all the rights to The Melting Pot brand and established The Melting Pot Restaurants, Inc.

The Melting Pot started franchising in 1985 and now has over 95 restaurants in the US and Canada.

The Melting Pot franchises pros and cons

Pros

• Initial franchise training: The franchisor provides a comprehensive training program to its franchisees. It trains them about its concept and procedures, customer service, hiring and training skilled staff, and operations. It also prepares them for a successful grand opening and ongoing local store marketing.
• Real estate: The franchisor offers its franchisees real estate support to identify a convenient restaurant location. Also, it helps them with the design, construction, and lease negotiations to reduce the cost of establishing and building their restaurants.
• Exclusive territory protection. The franchisor provides its franchisees with an exclusive territory to operate in. It does not grant any other franchises or operate competing restaurants in the agreed-upon area.
• National and local marketing: The brand offers its franchisees a dedicated marketing and advertising strategy. Franchisees can utilize national media, regional advertising, social media, email marketing, loyalty programs, and targeted local store promotional tools to build their public relations.
• Simple concept: The brand utilizes a simple and easy-to-execute concept. It has a unique dining experience that does not require chefs or highly trained staff, uses a simple kitchen set-up with few equipment and requirements, and operates on a one-day part or shift basis. Franchisees can get started fast and with lower labor costs.

Cons

• No direct financing: The brand does not offer direct or indirect financing to new franchisees. It also does not guarantee any lease, note, or grant on behalf of its franchisees.
• Not a passive business: The franchisor does not allow absentee business ownership. The franchisees are required to be fully involved in the daily operations of the restaurants.
• Not a mobile business: The business cannot be run from home or a vehicle. Franchisees need to have a retail facility, office space, or a warehouse.

How much does a The Melting Pot franchise cost?

On average, you may need to invest around $1,463,112 to open a The Melting Pot restaurant.

The investment amount is an average. Indeed, it will change depending on factors like restaurant size, location, etc. Generally, you would need to invest between $1,339,023 and $1,587,201 (Franchise Disclosure Document 2022).

The Melting Pot franchises startup costs

So why you would need to invest this amount? This initial investment covers all the startup costs you may need to pay to start a restaurant business. In addition to the initial franchise fee of $45,000, the investment amount covers:

• Formation Costs: real estate services fee, security deposit, leasehold improvements, computer and point of sales, gift card processing, website development, customer survey services, restaurant equipment, furniture, fixtures, signage, training expenses, licenses (alcoholic beverages, business, and health), etc.
• Initial Marketing: grand opening advertising fee 
• Operating Costs: opening inventory and supplies, insurance, rent, utility deposits, accounting firm fee for 3 months, reservation system, working capital for first 3 months, etc.

Type of cost	Low	High
Initial Franchise Fee	$45,000	$45,000
Formation Costs	$1,118,173	$1,230,431
Initial Marketing	$8,000	$15,000
Operating Costs	$167,850	$296,770
Total	$1,339,023	$1,587,201

What’s the AUV of a The Melting Pot franchise?

A The Melting Pot franchise makes $2,149,331 in sales per year on average.

The sales number is the annual median sales of 87 franchised restaurants operating in 2021. The AUV of a restaurant varies based on sates. For example, restaurants in the West generate more revenue than all the other regions in the US.

How profitable is a The Melting Pot restaurant?

On average a The Melting Pot franchise makes $573,266 in profits per year. This represents a 27% prof margin (adjusted EBITDA margin).

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

Yet note that to calculate this number we had to use the industry average for COGS (25% sales) and labor costs (29%). Indeed, unfortunately, The Melting Pot doesn’t provide any financial information whatsoever when it comes to costs. 

Profit and loss	Amount	% of sales
Sales	$2,149,331	100%
COGS	$(537,333)	25.0%*
Labor	$(623,306)	29.0%*
Rent	$(179,000)	8.3%
Royalty + marketing fees	$(236,426)	11.0%
Adjusted EBITDA	$573,266	~27%

Are The Melting Pot franchises good investments?

So should you open a The Melting Pot franchised restaurant? Are the future profits worth the required investment upfront of $1,463,000 (on average)?

Well we think so: the payback period for a The Melting Pot restaurant is 4.5 years on average, which is a very good payback.

This means you would need to wait on average (only) 4 to 5 years for the profits to repay creditors, any investors and yourself. After that, you can finally reap the profits of your franchised restaurant, impressive.

How does it compare vs. other franchises?