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Great Steak Franchise Costs & Fees

Date of Incorporation: 1985
Franchising Since: 1986
Headquarters: Scottsdale, Arizona

Business Description: The franchisor is Kahala Franchising, L.L.C. Franchisees operate a restaurant called Great Steak, preparing, specializing in, and serving genuine Philadelphia cheesesteak sandwiches, baked potatoes with all of the toppings, and related fast food menu items.

Franchise Offer: If qualified, franchisees may (i) construct a new Great Steak restaurant; (ii) purchase one of the franchisor’s Great Steak franchises by acquiring an existing business from another franchisee or from the franchisor; or (iii) convert all existing retail operations from another brand to the Great Steak brand.

Financial Assistance: Other than stated, the franchisor does not offer any direct or indirect financing or financing arrangement, nor will it guaranty franchisees’ obligations under any note or other obligation, except potentially for the lease for their site or if they purchase a restaurant corporate-owned “as-is” by one of its affiliates, and only in its sole and absolute discretion. If franchisees purchase a corporate restaurant “as-is” that is owned and operated by one of the franchisor’s affiliates, it may finance up to 100% of the purchase price, at its sole discretion.

Training and Assistance: The franchisor will make a Training Program available to franchisees and their designated representative after they sign the Franchise Agreement. The classroom portion of the Training Program will be held at KTEC (Kahala Training & Education Center), which is located at the franchisor’s corporate offices in Scottsdale, Arizona, and the in-store portion of the Training Program will be held at the franchisee’s restaurant location or at such other location(s) as the franchisor may designate in its sole discretion. The franchisor will provide one of its representatives to come to the franchisee’s restaurant during opening week for up to two days at its expense to work with the franchisee and manager on the grand opening, and on operating and marketing the restaurant. The franchisor may, in the future, hold refresher or additional training programs, conferences and seminars. The franchisee’s attendance at these programs is mandatory.

Territory: The franchise is granted only for the location specified in the Franchise Agreement or a location to be approved by the franchisor. The specific site of the Great Steak restaurant is subject to the franchisor’s approval. Franchisees will not receive an exclusive territory. Franchisees may face competition from other franchisees, from restaurants that the franchisor owns, or from other channels of distribution or competitive brands that the franchisor controls.

Term of Agreement and Renewal: The length of the initial franchise term is 10 years from the date the restaurant opens to the public. If franchisees are not in default and satisfy certain conditions, they may renew for 10 years.

Obligations and Restrictions: While the Franchise Agreement does not specifically require franchisees or their principals to personally participate in the direct operation of the franchise, it is the franchisor’s intention to select as Great Steak franchisees only those who plan to actively participate in the direct operation and daily affairs of the Great Steak restaurant. The franchise must be personally managed with on-premises supervision and directly operated by franchisees or another partner, shareholder or member of the business organization, or a manager who must have successfully completed the training program. The franchisor requires that franchisees’ business is solely that of a Great Steak restaurant, and they may not conduct any other business or activity at the site of the restaurant without the franchisor’s prior written approval. For traditional Great Steak franchises, franchisees must offer the full menu prescribed by the franchisor. Non-traditional Great Steak franchises may offer a more limited menu than the traditional Great Steak franchises, as detailed in the Operations Manual.

Estimated Number of Units: 85

Investment Tables:
Initial Investment for a Traditional Restaurant
Name of Fee Low High
Initial Franchise Fee $14,000 $30,000
Lease Review Fee $0 $1,250
Rent/Security Deposit (for 3 months) $12,000 $30,000
Travel and Living Expenses (2 persons) while training, not including salaries, if any, for franchisees and their employees $2,500 $5,000
Real Estate Varies
Architectural Fees $5,000 $10,000
Leasehold Improvements $40,000 $180,000
Restaurant Equipment, Furniture, Small Wares, Interior Signage and Menu Panels $40,000 $100,000
Exterior Signage $9,000 $12,000
Computer Hardware, Software (POS System) $2,700 $12,000
PCI Compliance Costs (per year) $150 $1,300
Opening Inventory (food and paper) $2,500 $7,000
Business Insurance $2,500 $7,000
Miscellaneous Opening Costs $4,750 $17,500
Grand Opening $5,000 $10,000
Depository Account $3,000 $3,000
Additional Funds (first 3 months) $5,000 $15,000
ESTIMATED TOTAL (Does not include real estate costs and/or rent for the business location except for the initial security deposit) $146,600 $439,050
Initial Investment for a Non-Traditional Restaurant
Name of Fee Low High
Initial Franchise Fee $4,000 $7,500
Lease Review Fee $0 $1,250
Rent/Security Deposit (for 3 months) $6,000 $30,000
Travel and Living Expenses (2 persons) while training, not including salaries, if any, for franchisees and their employees $2,500 $5,000
Real Estate Varies
Architectural Fees $5,000 $10,000
Leasehold Improvements $40,000 $120,000
Restaurant Equipment, Furniture, Small Wares, Interior Signage and Menu Panels $40,000 $60,000
Exterior Signage $9,000 $12,000
Computer Hardware, Software (POS System) $2,700 $12,000
PCI Compliance Costs (per year) $150 $1,300
Opening Inventory (food and paper) $2,500 $7,000
Business Insurance $2,500 $7,000
Miscellaneous Opening Costs $4,750 $17,500
Grand Opening $2,000 $6,000
Depository Account $3,000 $3,000
Additional Funds (first 3 months) $5,000 $15,000
ESTIMATED TOTAL (Does not include real estate costs and/or rent for the business location except for the initial security deposit) $127,600 $312,550
Other Fees
Type of Fee Amount
Royalty Fee and Surcharge Royalty Fee is the greater of the following: (i) 6% of total weekly Gross Sales or (ii) $400 per week. Surcharge is a maximum of $10 per week in addition to the Royalty Fee.
Advertising Fees Up to 4% of weekly Gross Sales.
Additional People Training Fee $1,000 per person ($500 per person for the In-Store portion of the Training Program, and $500 per person for the New Owner Training portion of the Training Program).
Annual Meeting Registration Fee Up to $1,000 plus incidental costs to attend.
Depository Account $3,000 (Must be replenished on a regular basis).
Data Fees Up to $75 per month (Subject to reasonable annual and/or service enhancement increases).
POS Help Desk Phone Support Maintenance Contract Fee $55 per month.
Renewal Fee $5,000
Transfer Fee – Non-Traditional Locations $5,000 for non-traditional locations.
Relocation Fee $500
Additional Training Fee in the Event of a Transfer of the Franchise Agreement $2,500 for two individuals ($500 for each additional individual).
Additional Training Fee $300 per person per day.
Document Administration Fee (if redraft is requested by franchisee) $500
Default Interest $50 plus interest at 1.5% per month or maximum legal rate, if less.
Late Report Fee $100 per report.
Collection Costs All collection costs including reasonable attorneys' fees.
Non-Sufficient Funds Fee $50 for each electronic funds transfer returned for non-sufficient funds; $25 for each check or draft returned for non-sufficient funds.
Audit Cost of Audit plus interest at Default Rate on underpayments or the maximum rate permissible by law.
New Supplier Approval Fee A charge not to exceed the reasonable cost of the inspection and the actual cost of the test not to exceed $5,000
Non-Participation Fee $100 per day.
Reinstatement Fee $2,500
Early Termination Fee The average monthly Royalty and Advertising Fees paid for any consecutive 12 month period within the preceding 48 month period multiplied by the number of months remaining in the term of the Franchise Agreement, and the product is divided by 2
Management Fee 6% of the Franchised Business’ Gross Sales (in addition to the Royalty Fee and Advertising Fee) plus the franchisor’s direct out-of-pocket costs and expenses.

The above information has been taken from the FDD of Great Steak. Year of FDD: 2015

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