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Schlotzsky's Franchise Cost & Fees

Date of Incorporation: 1971
Franchising Since: 1976
Headquarters: Atlanta, Georgia

Business Description: Schlotzsky’s restaurants are bakery-café, quick casual restaurants featuring premium sandwiches, pizzas, soups and salads and complementary food and beverages.

Franchise Offer: The franchisee will conduct business under the service mark “Schlotzsky's” and any other identifying marks and symbols that the franchisor uses now, or that it later develops, and use its unique system for the establishment, development and operation of the franchised restaurant. The franchisor authorizes Cinnabon Express Bakeries to operate in Schlotzsky’s restaurants. Cinnabon Express Bakeries are offered by Cinnabon through Cinnabon’s Franchise Disclosure Document.

Financial Assistance: The franchisor has made written arrangements with certain lenders not affiliated with it to establish general terms and conditions upon which such lenders will consider making loans to its franchisees. Such lenders include Franchise America Finance LLC, as franchise program manager for The Bancorp Bank. The franchisor may implement other similar programs with other companies. The franchisor also may change or eliminate any of these arrangements at any time without notice. The franchisor does participate in the SBA's Franchise Registry Program.

Training and Assistance: The initial training program currently consists of approximately 45 hours of classroom training, and approximately 145 hours of on-the-job training. Training classes, including refresher courses, will be offered at the franchisor’s training facility in Austin, Texas or another location specified, and on-the-job training will be in Restaurants, which may be in Austin, Texas or in other locations. Written, oral and video instruction is given and “hands-on” experience is stressed. If the franchisor determines that the franchisee does not have sufficient restaurant experience, it may require the franchisee to complete an internship in an existing Schlotzsky's restaurant in addition to the training program. The franchisee and the Restaurant Manager must attend the training. On-site training can be requested by the franchisee at any time; however, a fee may be imposed. The franchisor may periodically make available to franchisees or their employees, additional training programs that it, in its discretion, chooses to conduct. The franchisor may periodically conduct a conference, convention, program or training session.

Territory: The franchisee will receive a trade area Area of Protection. The size and scope of the Area of Protection will be in the Franchise Agreement and will be determined on a case-by-case basis. There is no minimum Area of Protection for a Restaurant and the Area of Protection could be limited to the site or space that the Restaurant occupies. The factors that we consider in determining the size of an Area of Protection include current and projected market demand, presence of other businesses, location of competitors, traffic patterns, access and visibility, location of other Restaurants, the franchisor’s future development plans and other market conditions. Additionally, the franchisee must provide catering and delivery services within a reasonable distance from the Accepted Location, within or outside the Area of Protection.

Term of Agreement and Renewal: The term of the Franchise Agreement is 20 years. Renewal or extension of the term is 20 years if the franchisee complies with the renewal requirements.

Obligations and Restrictions: The franchisee must personally supervise the operation of the restaurant, unless permitted in writing. The franchisee must devote the necessary time and best efforts for the proper and effective operation of the restaurant. If the franchisee is an individual, he or she must either serve as or designate a Restaurant Manager. An entity franchisee must designate a Restaurant Manager. The Restaurant Manager, who will have day-to-day management responsibility for the Restaurant, will exercise on-premises supervision and personally participate in the direct operation of the Restaurant. The franchisee must offer and sell all services, products, and programs that are required to sell. The franchisee may not sell any menu item, product, service, or program that is not a part of the franchise system.

Estimated Number of Units: 352

Investment Tables:
Initial Investment for a Schlotzsky's Restaurant with a Cinnabon Express Bakery
Name of Fee Low High
Initial Franchise Fee $30,000 $30,000
Real Property/Site Lease Varies
Leasehold Improvements $173,350 $309,000
Leasehold Improvements (for a converted location) $49,000 $498,000
Furniture, Fixtures, Equipment, Smallwares, Millwork, Menu Boards, Graphics and Point-of-Sale System $148,400 $216,000
Furniture, Fixtures, Equipment, Smallwares, Millwork, Menu Boards, Graphics and Point-of-Sale System (for a converted location) $127,385 $220,000
Exterior Signage $9,000 $18,000
Licenses and Permits $1,000 $3,000
Due Diligence / Lease Acquisition / Professional Fees (Architect) $10,000 $25,000
Supplies and Inventory $18,000 $25,000
Insurance $8,000 $14,000
Deposits $3,000 $5,000
Training Costs (Travel, Meals, Lodging, Salaries, Pre-Opening Crew Labor) $24,500 $37,000
Grand Opening Advertising and Promotions Expenditure $15,000 $25,000
Additional Funds (3 months) $39,000 $48,000
Cinnabon Express Bakery Initial Franchise Fee $7,500 $7,500
Cinnabon Express Bakery $17,064 $24,484
ESTIMATED TOTAL INITIAL INVESTMENT (excluding real estate costs) $503,814 $786,984
ESTIMATED TOTAL INITIAL INVESTMENT for a Converted Location (excluding real estate costs) $358,449 $979,984
Other Fees
Type of Fee Amount
Royalty 6.0% of Net Sales.
Advertising Contribution 4.0% of Net Sales (currently, 2.0% of Net Sales collected for the Ad Fund will be spent directly by the Ad Fund and the remaining 2.0% of Gross Sales collected for the Ad Fund will be remitted by the Ad Fund to local advertising groups).
Promotions Costs to participate and purchase, lease and install (and periodically replace) all systems and materials necessary to promotional campaigns, including Internet and social media initiatives, counter cards, posters, banners, signs, photographs, give-away items and gift cards. The franchisor may charge the franchisee its costs plus a reasonable administrative fee.
Local Advertising Groups Local advertising groups (LAG) may determine an amount that must be contributed directly to the LAG in excess of the franchisee’s Advertising Contribution.
EFT NSF Fee The franchisor’s out-of-pocket costs and an administrative fee.
Late Fee for reports, financial statements or tax returns $100 per day.
Subsequent Trainee Initial Training Fee Currently, up to $500 per trainee.
Replacement Manager Initial Training Fee Up to $500 per trainee.
On-Site Training and Assistance A reasonable fee, currently, $50 per hour per trainer plus trainer’s travel and living expenses.
Additional Support/Consulting Fee A reasonable fee, currently, $500 per day, plus travel and living expenses.
Conference Program Fee A reasonable fee, which will vary by program.
Training Cancellation Fee The franchisor’s out-of-pocket costs.
Electronic Learning Management System Amount of fees. The franchisor estimates the cost will be $500 to $750 annually.
Supplier Product Evaluation Fee The greater of $2,500 or the actual cost of the supplier/product evaluation process.
Rent Will vary based on location and other factors; the franchisor estimates rent will range from $3,000 to $20,000 per month.
Lease Renewal Fee The then-current fee. Currently, $2,000
Lease Documentation Fee $500 for each failure.
Relocation Extension Fee Another Initial Franchise Fee of$1,500 per year of extension on term.
Transfer Fee 50% of the then-current Initial Franchise Fee if it is a Control Transfer; if it is a transfer to a related party or that is a non-Control Transfer, 10% of the then-current Initial Franchise Fee.
Renewal Fee 10% of the then-current initial franchise fee.
Appraiser's Fee 50% of appraiser's fee.
Liquidated Damages The average monthly amount of Royalty owed to the franchisor during the past 36 months times the lesser of remainder of term of the Franchise Agreement or 36 months. If less than 36 months have passed since opening and termination, the amount will be the average monthly Royalty during the time between opening and termination, times the lesser of remainder of the term of the Franchise Agreement or 36 months.
Indemnification of Franchisor Franchisor’s cost.
Attorneys' Fees Franchisor’s cost.
Reinstatement Fee 10% of the amount of the then-current Initial Franchise Fee, plus Royalty Fees that would have been payable in period between termination and reinstatement.
Audit Cost of audit.
Communication Access Reasonable fee.
Updating, relocation or reconstruction of your Restaurant Amount varies and is based on the extent of reconstruction or costs associated with updating, relocation and outfitting of new premises for the franchisee’s Restaurant. The franchisor estimates the amount may range from $25,000 to $150,000 but could be higher depending on the age, condition and size of the Restaurant.
Updating and maintaining computer systems; Systems Fee The franchisor estimates the cost of computer hardware and software maintenance to be $4,000 to $6,000 per year. The amount for upgrades varies based on the extent of the upgrade or services provided.
Catering support, ordering systems, and rewards The franchisor estimates the fees for catering support services and ordering systems to be from $1,000 to $2,000 annually, depending on the amount of orders, purchases and services received. In the future, the franchisee may also be required to pay an estimated 5% of catering sales made to catering rewards members to fund rewards granted to such members.
Debit/Credit Card Fees and Other Transaction Fees Equipment costs and set up fees estimated to be up to $500 per terminal if purchased through First Data or $35 a month if rented through First Data. These costs could be substantially higher if purchased or rented from another processor or terminal provider. Transaction fees estimated to be from 2.5% to 5.0% of transaction amounts. Other fees may apply depending on the vendor used for credit card processing.
Gift Card and Loyalty Card Fees Amount of fees.
Technology Training Will vary.
Legal Administration Costs Will vary based on the nature of the request, estimated cost will not exceed $2,000 - $5,000
Interest 1.5% per month or maximum legal interest rate.
Purchasing Program Fee Reasonable membership fees assessed by the Purchasing Program.
Supply Chain Fee Currently, $0.25 per case purchased through certain Appointed Distributors.
Development Deadline Extension Fee $2,500 per missed deadline.
Failure to Comply with Standards or Law Fee Up to a $5,000 fee plus the franchisor’s reasonable expenses connected with any inspection, examination, or analysis of products.
Repeated Inspection Fee Cost of inspection.
Restrictive Covenant Violation Fee $2,500 for an hourly employee, $5,000 for an assistant manager, $7,500 for a manager or general manager, and $10,000 for a corporate employee.
Taxes Franchisor’s costs.

The above information has been taken from the FDD of Schlotzsky's. Year of FDD: 2016

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