Waba Grill Franchises Profits are Worth Investing $454K

One of the most popular Asian American food franchise along with the giant Panda Express, Waba Grill has today more than 210 restaurants across the US. And unlike Panda Express, Waba Grill is receiving new franchise applications, great news if you want to get into the Asian American restaurant business.

In addition with a strong brand name and unique menu, Waba Grill is also a very profitable business. Indeed, whilst you would invest on average $454,000 to set up a new restaurant, your business would make $466,536 in turnover per year, that’s a good sales-to-investment ratio.

So should you invest in a Waba Grill? In this article we’ll look at its franchises from the angle of its Franchise Disclosure Document. We’ll look at how much profits you can really make and whether it’s a franchise you should go for. Let’s find out!

Key stats

Franchise fee	$35,000
Royalty fee	5.00%
Marketing fee	4.00%
Investment (mid-point)	$459,000
Average sales	$509,000
Sales to investment ratio	4.0x
Payback period	[franchise_value_investment_payback]
Minimum net worth	$1,000,000
Minimum liquid capital	$250,000

What is Waba Grill?

L&L Hawaiian Barbecue is an American fast-food restaurant chain that serves Asian American-inspired dishes such as chicken katsu and kalua pork and Hawaiian dishes such as the Loco Moco and Saimin.

It is also known for the “Hawaiian plate lunch” concept: two scoops of rice, a scoop of macaroni salad, and a meat or seafood entrée.

Headquartered in Honolulu, Hawaii, the brand first started in 1952 as L&L Hawaii Drive-inn before being converted into a Hawaiian-themed restaurant and branded as L&L Hawaiian Barbecue by Johnson Kam and Eddie Flores Jr. in 1976.

The brand’s franchising journey began in 1990, and it now has more than 210 stores in the US and worldwide.

Waba Grill franchises: pros and cons

Pros

• Hands-on training: The brand is keen on franchisees’ success and ability to run their businesses smoothly. It provides them with extensive on-the-job training, and proven food operating systems for the streamlined operations of their restaurants.
• Management support: The brand offers its franchisees extensive management support to establish their restaurants and grow smoothly. Franchisees get expert advice from top and field managers on operations, progress reviews, ongoing consultations, P&L management, meetings and conventions, and mentorship from successful brand partners.
• Real estate and construction: The brand gives franchisees guidance and suggestions for locating an approved viable business location in terms of geographic area and traffic. It helps them establish their restaurants from scratch or remodel existing ones. It also facilitates them with recommended specifications, standards, procedures, standard décor, and layout plans for the restaurants.
• Effective marketing support: L&L Hawaiian Barbecue has dedicated marketing and advertising strategies. It provides its franchisees with efficient promotional campaigns and targeted local store marketing tools to create a loyal customer base in their locations.

Cons

• No exclusive territory: The L&L franchise does not offer its franchisees an exclusive territory. Franchisees may face competition from franchises granted by the franchisor or other competitive channels and brands it owns or controls.
• No Financing: The brand does not provide franchise financing for start-up costs, inventory, and equipment. Also, it does not guarantee any lease, grant, or note on behalf of its franchisees.
• No absentee ownership: The franchise is not a passive investment. Franchisees must be fully involved in the daily operations of their businesses.

How much does a Waba Grill franchise cost?

You have to invest around $454,000 to open a Waba Grill franchise restaurant.

This is an average; indeed, it varies based on many factors, such as the location of your restaurant, its size, economic conditions, etc.

In addition to the initial franchise fee of $30,000, which you must pay to the franchisor, you would also pay for the leasehold improvements, furniture and fixtures, signage, equipment, etc.

Here’s the full breakdown of costs:

Expense	Amount
Initial franchise fees	$30,000
Equipment and furniture	$25,000 – $35,000
Leasehold improvements	$225,000 – $400,000
Signage and menu board	$8,000 – $20,000
Additional funds-3 months	$20,000 – $30,000
Other	$28,000 – $57,000
Total	$336,000 – $572,000

What’s the average turnover of a Waba Grill restaurant?

On average, a Waba Grill franchise makes $466,536 in turnover per year.

Note that Waba Grill doesn’t provide much information about its franchise restaurants financial performance in its FDD report. So instead we estimated this number by dividing the total revenue of all Waba Grill franchises ($80.7 million) by the number of franchise-owned restaurants (173). 

How profitable is a Waba Grill franchise?

On average, a Waba Grill Restaurant franchise makes $126,284 profits per year. This corresponds to a 27% profit margin (adjusted EBITDA).

Profit and loss	Amount ($)	% sales
Sales	$466,536	100%
COGS	($116,634)	25.0%*
Labor	($135,295)	29.0%*
Rent	($51,000)	10.9%
Royalty + marketing fees	($37,323)	8.0%
Adjusted EBITDA	$126,284	~27.0%

Unfortunately, Waba Grill Restaurant 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.

Is a Waba Grill franchise a good investment?

To answer that question, we must look at the payback period. In short, we divide the upfront investment cost of $454,000 you would need to invest if you were to start a new Waba Grill franchise by the annual profits you can expect to make with this business.

For profits, we estimate Waba Grill restaurants to reach 15% net profit margin (as % of sales), considering adjusted EBITDA is 27%.

This means that the payback period is 6.5 years: you would need to wait 6.5 years on average to repay the initial upfront investment cost of $454,000 with the future profits from the business. That’s a good payback period, and as such a good investment from a financial perspective.

How does it compare vs. other franchises?

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