Ice Cream Business Information - Part 2

Information Tables
 

Initial franchise fee
 
As shown already, there are ice cream franchises of every shape and size, from the ice cream van to the dine-in.  This is reflected in the initial cost of setting up a franchise. The more leasehold improvement a location needs, the larger it is and in turn it will be more expensive.  The initial franchise fee for a single unit ice cream franchise, based on our sample, is $25,711.  This amount is usually paid upon the signing of the franchise agreement.  The estimated initial investment is a projection of the expenses needed to establish the business in the first few months.  It includes leasehold improvement, fixtures and equipment, signs, opening inventory, training expenses, insurance fees, licenses fees, etc.  It is recommended that the budget be flexible enough to allow for the unexpected.  The average estimated investment is $483,620.  The table below details expenses for each franchise system in our sample.

*Amount for a full store; the rate will vary for an express store.

Typical on-going fees

The information in the disclosure documents is in line with franchises in other lines of business.  Two franchisors were offering a different royalty arrangement. Coolcycle Franchising proposed a fixed monthly amount, independent from the sales figures, while Carvel Franchise proposed a fixed cost per gallons purchased.  In other cases, the royalties are a percentage of the weekly gross sales and are usually due on a weekly basis. The table below also details advertising fees, based on the gross sales.  The transfer fee is the amount to be remitted to the franchisor if the franchise changes ownership. In addition to this amount, the new franchisee might have to pay for his/her initial training. Supplementary training may incur additional expense if more guidance is needed after the initial training, or if a new manager or employees joins the team.
 

Average On-going Fees

*Some franchises have rates per person.

Length of initial terms and renewals

There isn’t a lot of variation from franchise to franchise, with the longest agreement among our sample being 20 years (Carvel Franchise).  More than 44% of the franchises analyzed in this report had a franchise agreement of 10 years.  A marginally lower number of franchises, 38.8%, had a 5-year agreement.

Only one franchise did not offer the option of renewing the franchise agreement.  The other disclosure documents included the length of the renewal period, which varied between 5 and 20 years.  On average, the length of a renewed franchise agreement is 10 years.

Initial training

Training varies greatly between franchisors.  This can be attributed to the fact that there is a wide range of franchise offerings, and some franchisors have more resources than the smaller players.  Depending on the size of the business and its concept, the length and topics covered during the training will differ.

On average, a franchisor will offer 33.3 hours of in-class training and 79 hours of on-the-job training.  However, the data collected from our sample of ice cream franchises ranges from 10 to 56 hours of classroom training.  Some franchisors offer no on-the-job training, while the longest in our sample was 320 hours.

Topics covered were:

• general product knowledge;
• production processes (when required);
• customer service; and
• technical mastery of the IT system.

Most franchisors also train the franchise owner or his/her general manager to deal with the administration tasks involved in running the business.