How Much Does It Cost to Open a Popeyes Franchise? [Revealed]
With the popularity of its new chicken sandwich, Popeye restaurants are making $400K more per year on average. The fast-food industry as a whole has steadily grown at a rate of 1.1% between 2016 and 2020. Opening a Popeyes franchise is an attractive investment for those with experience managing fast-service restaurants.
The median cost to open a Popeyes franchise is roughly $2.1 million. This includes the cost of real estate, constructing a building, training, equipment, furniture, and insurance. Since the average Popeye makes around $300K to $400K in profit each year, you can see an annual ROI of 17%.
Want to learn more about the specific costs of opening a Popeyes franchise? Keep reading and check out the most frequently asked questions at the end of our article.
A Glance at the Costs to Open a Popeyes Franchise
|Equipment, Signage & Technology||$325,000.00|
|Extra Working Capital||$25,000.00|
Requirements to Open a Franchise
Before we dive into the specific costs associated with opening a Popeyes restaurant, we want to highlight the minimum requirements to open a franchise:
- Experience in the food and beverage industry
- A liquid net worth of $500,000
- The total net worth of $1 million
- Desire to grow the Popeyes brand
Popeyes requires all franchisees to pay a one-time $50,000 franchise fee. This is a fee per restaurant, not a fee to own territory. All fees paid to Popeyes are non-refundable.
There are certain scenarios in which Popeyes will lower the franchise fee. For example, if you qualify for Popeye’s Veterans or Women and Minorities Development Incentive Program, the fee is reduced to $27,500.
Popeye may also reduce the franchise fee in alternative locations, including medical facilities, universities, and military bases.
Before signing a franchise agreement with Popeyes, you will want to hire a lawyer – more importantly, a lawyer specialized in franchises. These lawyers have experience reading both franchise agreements and Franchise Disclosure Documents and franchise agreements, and know exactly what to look for.
Some franchise lawyers can help you save money in the long run by negotiating contract terms. While a big brand like Popeyes may be difficult to negotiate with, it certainly never hurts to try.
To simply have a lawyer review the franchise documents before you sign them, you should expect to pay at least $500. Negotiations result in more billable hours and can increase your legal fees by a few thousand dollars. A conservative estimate of the total cost of legal fees is $2,500.
We like to consider “soft costs” as service costs. These are ad-hoc expenses you will incur for accounting, legal, administrative and architectural services. You will likely need these services beginning at the agreement stage until the opening date.
Soft costs can vary extremely, and depend on where you live, who you use for the services, and how big the restaurant is going to be. Popeye’s gives an estimate of $7,800 to $265,000.
There are two options when it comes to finding land for a Popeyes restaurant – a ground lease and buying land. Popeyes restaurants range from 1,600 to 3,500 square feet. Your land should range from 28,000 to 38,000 square feet. This gives you enough space for the building and parking lot, which should have between 25 and 30 parking spaces.
The purpose of a ground lease is to lease the land for a long time – between 50 to 99 years. You own the building, but not the land. Ground leases can be advantageous because they give franchisees the ability to build on land that would be too expensive to purchase outright. Depending on the location, you can expect to pay at least $5,000 per month or $60,000 per year for a ground lease.
Buying land is the alternative to a ground lease. This option is much more expensive upfront but can lease savings in the long run. In a high-traffic, commercial area, you should expect to pay between $500,000 to $2 million to purchase the land for a Popeyes restaurant.
Does Popeyes Recommend Leasing or Buying Land?
Popeyes does not have a stance on leasing or buying land. It makes it clear in its Franchise Disclosure Document that it cannot estimate the cost of purchasing commercial land because it varies vastly depending on the market. Popeyes does however specify that franchisees should not pay more than two months’ rent upfront.
Before you hire a contractor to build your restaurant, you need to take various steps to prepare the land. If you leased the land, site work may be minimal. On the other hand, franchisees who buy their land often spend more on-site preparation costs. Popeye’s estimates for site work range from $40,000 to $650,000. It’s safe to assume that you will pay at least $200,000, depending on the size of your land.
What does site preparation include? Site preparation includes preparing the land for all basic utilities – electric, sewage, and water. In addition, it includes the cost to excavate the land and pave sidewalks and the parking lot.
As a franchisee, your building must meet standards created by Popeyes. Your developer has to submit all the building plans to Popeyes and Popeyes will either approve or deny the design. All franchises get a standard construction plan from Popeyes after entering into the franchise agreement.
Based on Popeye’s standard construction plans, the cost of a building ranges from $100,000 to $1 million. Most franchisees should expect to pay between $500,000 to $600,000 for the building alone. Only licensed contractors that meet Popeye’s construction standards are allowed to build for you.
Equipment, Signage, and Technology
Popeye’s Franchise Disclosure Document contains the general category of “furniture, fixtures, equipment, signage, and technology.” This is basically everything inside the restaurant and your signage on the exterior of the building.
All these items are sold in a package through Popeyes – you cannot buy them on your own. The exact cost of the package depends on the size of your store and how big it is. Popeyes provides a range of $165,000 to $485,000.
Examples of items included in the FF&E Signage and Technology package include:
- Point of sale (POS) systems
- Fountain machines
- Commercial-grade ovens
- Kitchen utility tables
- Freezers and refrigerators
After you open your Popeyes restaurant, supplies will become a part of your monthly expenses. However, the first two weeks of supplies are part of your opening expenses. The estimated costs for opening supplies range from $11,500 to $23,000.
It’s important to note that opening supplies do not include your food inventory. Instead, opening supplies includes uniforms, training materials, paper bags, and plastic silverware, for example.
Extra Working Capital
There’s always the chance that you will need access to cash during your first few months of operations. For this reason, Popeyes recommends that franchisees set aside three months’ worth of funds for expenses. This “safety net” should range from $20,000 to $30,000.
Obtaining a business license might be one of the cheapest expenses, ranging from $300 to $600. Most franchisees start either a limited liability company (LLC) or a corporation. Popeyes does not require a specific business license. You should incorporate the business before entering into franchise agreements.
To find out more details on the costs of a business license, we recommend contacting your city or state’s business licensing agency.
As with any restaurant, there are various risks – fires, employee and customer injuries, and food poisoning. To protect your restaurant, Popeyes requires that you obtain the following types of insurance:
- Property insurance
- Auto liability (if you use any vehicles for your franchise)
- Workers’ compensation
- Employer’s liability
- General liability
Popeye estimates that your initial insurance costs will range from $9,000 to $18,000. Your ongoing monthly premiums will depend on various factors, including the size of your restaurant, how many employees you have, and what state you do business in.
Nearly all franchisors require their franchisees to undergo a training program before opening their business. Also, franchisees will have to pay for employee training (if not done on the job) before the store opens.
How does training work at Popeyes?
Popeyes makes its franchisees complete a training program at Certified Training Restaurants, which may be in a different state. If you’re franchising your first Popeyes restaurant, you and at least five members of your management team must complete the training program. If it’s not your first restaurant, then at least four members of management must complete the training program.
You must pay for all costs associated with the training – flights, lodging, and food. The initial training costs, according to Popeyes, range from $17,200 to $24,200.
It’s important to note that royalties are not part of the initial investment. Royalties are part of the ongoing costs of operating a franchise business. Franchisees must pay Popeyes 5% of gross sales. Like the franchise fee, Popeyes negotiates royalties for franchises on U.S. military bases or at universities. These franchises could pay as little as 2% in royalties.
Do Royalties Cover Any Business Expenses?
No, royalties do not typically cover any business expenses when you own a franchise. You pay royalties so that you can use Popeye’s name and for ongoing training.
Advertising Funds Contributions
As a franchise owner, you are not responsible for advertising the business. The Popeyes corporate office carries out marketing campaigns. Popeyes franchisees must pay 4% in gross sales to contribute to the advertising fund. In addition, franchisees must also pay up to 1.75% in gross sales towards local advertising.
Franchise owners generally do not have much control over advertising. However, you do not need to pay anything on top of the maximum 5.75% in gross sales.
Frequently Asked Questions
Still, have a few doubts about the costs associated with opening a Popeyes franchise? Take a look at some of the most frequently asked questions below.
How Much Can You Make as a Popeyes Franchisee?
A Popeyes owner can make between $300,000 to $400,000 per year, and even more in certain markets.
What Are the Profit Margins of a Popeyes Restaurant?
Your exact profit margin will depend on the overall operating efficiency of your restaurant. Popeyes does not publicly disclose profit margins, but most fast-food margins are in the 6 to 9% range.
How Do You Apply to Open a Popeyes Franchise?
You can apply to open a Popeyes Franchise in the United States and Canada, or outside of North America on Popeye’s website.
Will Popeyes Finance My Restaurant?
No, Popeyes makes it clear that it does not finance any part of your initial investment. To get the funds to start a restaurant, you will need to find a private lender.
Do I get My Territory When I Franchise a Popeyes?
You can get your territory if you sign a “Development Agreement.” If you sign a “Non-Exclusive Development Agreement,” you do not get territorial rights.
How Many Employees Do I Need to Hire?
Depending on how busy your Popeyes restaurant is, you may need to hire between 25 to 60 employees. Keep in mind, that many restaurants have at least eight employees working at a time.
Is it Worth it to Open a Popeyes Franchise?
If you have a passion for the food service industry and don’t mind putting in the long hours, it is worth it to open a Popeyes franchisee. Opening a franchise is best for those who want a recognized brand and a structured business model. You’ll have the guidance of Popeyes corporate and can avoid many of the challenges that come with starting a business from scratch.
Given that single restaurants can see profits of around $300K to $400K per year, that’s a 17% return on investment if you spend the median of $2.1 million to open your Popeyes. While it requires much more work than keeping funds in the stock market, you could bring in a much higher ROI. With hard work, opening and running a Popeyes franchise can pay off.