Pizza Franchise Report 2010
Franchise Information
Franchise Fees
The table below provides an overview of the estimated initial investment required to open a single unit of 25 pizza franchises. It also contains a detailed profile of each franchise which presents these costs in more detail. The profiles are extracted from the Franchise Disclosure Documents (FDD) of the 25 franchisors.
Table 2: Franchise Information Collected from the FDD’s of 25 Pizza Franchises.
| Name of franchise | Year Established | Initial franchise fee | Estimated Initial Investment – Low - | Estimated Initial Investment – High - |
|---|---|---|---|---|
| Ameci Pizza & Pasta, Inc. | 1985 | $25,000 | $133,200 | $222,800 |
| Arizona Pizza Co. Inc. | 2002 | $35,000 | $400,000 | $865,000 |
| Blackjack Pizza | 1998 | $15,000 | $161,800 | $380,100 |
| Boston Pizza | 2001 | $50,000 | $1,699,000 | $2,780,500 |
| Bucks Pizza | 1994 | $20,000 | $165,450 | $345,400 |
| Captain Tony's Pizza | 1985 | $20,000 | $162,960 | $346,810 |
| Domino’s | 1960 | $25,000 | $119,950 | $461,700 |
| Extreme Pizza | 1994 | $30,000 | $169,000 | $376,000 |
| Figaro's Pizza | 1986 | $52,500 | $101,000 | $398,450 |
| Godfather's Pizza | 1973 | $25,000 | $448,000 | $629,500 |
| Hungry Howie's Pizza | 1981 | $15,000 | $121,100 | $433,000 |
| Little Ceasars | 1962 | $20,000 | $185,050 | $519,000 |
| Nick-N-Willy's | 2001 | $25,000 | $300,150 | $425,700 |
| Noble Roman's Pizza | 1972 | $15,000 | $30,600 | $323,500 |
| NYPD | 1996 | $25,000 | $422,696 | $544,300 |
| Papa Bello | 2006 | $25,000 | $209,111 | $379,811 |
| Papa John’s | 1984 | $25,000 | $113,823 | $529,123 |
| Papa Murphy’s Shake 'n' Bake | 1995 | $25,000 | $171,655 | $353,225 |
| Pizza Fusion | 2006 | $30,000 | $305,300 | $405,500 |
| Pizza Hut | 1967 | Varies | $453,400 | $2,953,200 |
| Red Brick Pizza | 1998 | $25,000 | $175,000 | $499,000 |
| Sarpino's | 2002 | $19,995 | $178,395 | $237,695 |
| Shakeys | $25,000 | $794,000 | $2,194,500 | |
| Venuto's Old World Pizza | 2006 | $27,500 | $169,300 | $264,000 |
| Zpizza | 1986 | $25,000 | $186,500 | $257,500 |
Table 3: Ongoing Fees Related to 25 Pizza Franchises:
| Name of Fee | Average |
|---|---|
| Royalty | 5% |
| Leasehold Improvement | $293,732 - $295,057 |
| Local/ Regional Advertisement | 2.49% |
| National Advertisement | 2.3% |
| Renewal | $6210 |
| Average Estimated Initial Investment | $29,505 - $685,012 |
Location
As with any food franchise, it is paramount to select the best location for the business. When selecting a pizza franchise location, a franchisee will need to take into consideration the local demographics, traffic patterns, parking, character of neighborhood, competition from other businesses within the area and the size and appearance of the site.
Site selection
A franchisor may or may not aid in the selection of a franchise site. It will state in the FDD of each franchise how much assistance is given in the selection of a site. The prospective franchisee will need to submit a location proposal for the approval of the franchisor. If the site location is not approved, the franchisee will need to select another site.
Territory
An exclusive territory gives the right of the territory to the franchisee preventing the franchisor from appointing any other franchisees in the territory or from conducting businesses themselves in the territory. The boundaries and terms for each franchise will vary. For example Hungry Howie’s Pizza will not operate restaurants or grant franchises within a one mile radius of the franchise. However, this agreement allows that all Hungry Howie’s franchisees can deliver into each other’s exclusive territory. Noble Roman’s Pizza, on the other hand does not offer the franchisee an exclusive territory. The franchisee may face competition from other franchisees or from other outlets or channels of distribution that the franchisor may own.
If a franchisee is unable to find a suitable location, after a specified amount of time, this may constitute a default under the franchise agreement.
Length of the Franchise Agreement
The term of the franchise agreement for a pizza franchise can range from 5 years to 20 years depending on the franchise package. The majority of pizza franchise agreements are for a term of 10 years.
Staffing and Training
Each pizza franchise offers specific training courses and material. All training programs are split into two components: on-the-job training and classroom training. The franchisee receives an operations manual, store operations manual, kitchen training manual equipment specifications manual and counter service training manual. The franchisor expects the franchisee to pay for the expenses of their staff and themselves while on the training course.
The franchise training will also cover how to hire and train staff for a successful franchise. The franchisor will also supply the training equipment needed for this training and will be contactable if any help is needed.
Regulations
The food service and restaurant industry is one of the most regulated industries in the U.S. A variety of regulations, laws and ordinances govern the operation of a restaurant business. The following is a list of regulations that will affect the everyday running of a pizza franchise.
- Food Safety
- Sanitation
- Nutritional Labeling
- Minimum Wage, Tips, and Overtime
- American with Disabilities Act
- Child and Teen Labor
- Immigration
- Taxes
The U.S. Food and Drug Administration, the U.S. Department of Agriculture and state and local health departments administer and enforce regulations that govern food preparation and service and restaurant sanitary conditions.
A franchisor may or may not provide assistance in determining the federal, state and local laws that affect the franchise. There are often variations in licensure requirements and regulations from state to state. Investigating, understanding and the application of licensure regulations is the franchisee’s sole responsibility.
| The world’s largest pizza order Papa John's broke the world record for the largest pizza order and delivery, after delivering 13,500 pizzas to San Diego’s NASSCO shipyard in 2006. The pizza delivery was a reward from Papa John's for building of thedry cargo/ammunition ship, the USNS Lewis and Clark. The order fed over 60,000 people. Papa John’s beat the former Guinness World Record for "World's Largest Pizza Order", which was in August 1998 with an order placed by the VF Corporation for 13,386 pizzas at 180 locations across America. The Papa John’s "World's Largest Pizza Order" were delivered to one location at one time. |
Outlook
The outlook for the pizza industry is positive. The increased usage of mobile internet devices and the popularity of social networking sites have made it possible for pizza businesses to keep up to date with the needs and wants of their customers. It has also allowed them to launch new and more specialized marketing and promotional campaigns directed at local audiences. In doing this the pizza industry has increased their sales for the first quarter of 2010 and the industry is set to continue to grow.
Pizza franchises have shown that they have the foresight and ability to recognize changing consumer trends and adapt their businesses and marketing strategies accordingly.
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