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American Deli Franchise ProfileRestaurant Franchises > Quick-Service Restaurants |
What Are the Initial Investment Requirements for an American Deli Franchise?
To open an American Deli franchise, potential franchisees should prepare for an initial investment ranging from $295,500 to $551,000. This includes a franchise fee of $10,000. It's important to have a net worth of at least $250,000 to $500,000 and sufficient cash reserves to cover the startup costs. Additionally, ongoing fees include a royalty fee of 3% and a marketing fee of 1% of gross sales, which are essential for maintaining brand presence and operational support.
What Are the Average Revenues and Financial Performance of an American Deli Franchise?
Franchisees can expect average annual revenues of approximately $6.65 million, with a median revenue of $500,000 per unit. The revenue potential varies significantly, with the lowest annual revenue reported at $150,000 and the highest reaching $1.2 million. Notably, the breakeven period for franchisees is around 12 months, and the investment payback period is estimated at 22 months, making it a potentially lucrative opportunity for dedicated operators.
What Are the Typical Operating Expenses for an American Deli Franchise?
Running an American Deli franchise involves various operating expenses. Lease payments can range from $9,000 to $18,000 annually, while phone and internet services typically cost around $400. Other expenses include business supplies ($500 - $1,000), opening publicity and promotions ($3,500 - $5,000), and business licenses and permits ($5,000 - $20,000). Overall, total annual running expenses can vary between $49,400 and $105,600, which franchisees should consider when planning their budgets.
How Many Franchised Units Are There in the American Deli Chain?
The American Deli franchise has shown consistent growth over the years. In 2018, there were 144 franchised units, which increased to 156 in 2019 and further to 173 in 2020. This growth indicates a strong market presence and potential for expansion, making it an attractive option for aspiring franchisees looking to invest in a proven business model within the deli segment.
American Deli Franchise Financial Requirements
Below, you’ll find an overview of the initial investment needed to launch the business, along with the ongoing fees required by the franchisor to maintain operations over time.
The minimum total assets (minus liabilities) you must possess.
Net Worth Required:
The estimated period to recoup your total investment.
Investment Payback:
The initial fee paid to join the franchise system.
Franchise Fee:
Ongoing percentage of revenue paid to the franchisor.
Royalty Fee:
Regular contribution toward the franchise’s advertising fund.
Marketing Fee:
The estimated timeframe to recover your initial costs.
Breakeven Time:
The total amount required to launch the franchise.
Initial Investment:
The minimum liquid capital you must have on hand.
Cash Required:
The typical yearly revenue generated per franchise location.
Average Revenue:
The middle value of yearly revenue among franchise locations.
Median Revenue:
The largest reported annual revenue among franchisees.
Highest Revenue:
The smallest reported annual revenue among franchisees.
Lowest Revenue:
A broad sector defining similar types of franchise businesses.
Industry:
A more specific division within the broader industry.
Category:
The key individuals guiding the franchise’s strategy and growth.
Leadership:
The official business address of the franchisor’s headquarters.
Corporate Address:
Available financing options to help start the franchise.
Funding Year:
The main organization that owns the franchise brand.
Parent Company:
American Deli Franchise Unit Growth Summary
A breakdown of corporate, franchised, and total units, with yearly net changes.
Total Units
Franchised Units
Corporate Units
| Units | 2018 | 2019 | 2020 |
|---|---|---|---|
| Total Units | 150 | 160 | 172 |
| Net Change YoY | 10 | 12 | |
| Franchised Units | 144 | 156 | 173 |
| Net Change YoY | 12 | 17 | |
| Corporate Units | 6 | 4 | 1 |
| Net Change YoY | -2 | -3 |
Investment Overview
The American Deli franchise presents an attractive investment opportunity with an initial investment range of $295,500 to $551,000. The franchise fee is set at $10,000, with ongoing royalty and marketing fees of 3% and 1% of gross sales, respectively. Prospective franchisees should prepare for a cash requirement that aligns with the overall investment, alongside a net worth requirement between $250,000 and $500,000.
Revenue Potential
Franchisees can expect varied revenue performance, with average annual revenue per unit reported at $36,927. The median annual revenue stands at $500,000, while the lowest and highest annual revenues recorded are $150,000 and $1,200,000, respectively. This wide range indicates potential for significant earnings, depending on location and management effectiveness.
Breakeven and Payback Period
Franchise owners can anticipate a breakeven time of approximately 12 months, which allows for a relatively quick recovery of initial investments. The investment payback period is estimated at 22 months, providing a clear timeline for franchisees to gauge their financial performance and return on investment.
Franchise Growth
The American Deli franchise has demonstrated steady growth in its franchised units, increasing from 144 in 2018 to 173 in 2020. This growth trajectory reflects the brand's expanding market presence and indicates a healthy interest among investors. The reduction in corporate units from 6 to 1 suggests a strategic shift towards franchising.
Operational Expenses
Franchisees should budget for various operational expenses, which can range from $49,400 to $105,600 annually. Key expenses include lease payments, business supplies, and insurance premiums. Understanding these costs is crucial for effective financial planning and maintaining profitability within the franchise model.
Financial Performance Metrics
The average annual revenue for the American Deli franchise stands at $6,651,134, with a gross profit margin of 65%. The cost of goods sold accounts for 35% of revenue, highlighting the importance of effective inventory management. Although operating expenses and EBITDA figures are currently unknown, these metrics are essential for assessing overall financial health and operational efficiency.
Frequently Asked Questions
The initial investment for an American Deli franchise ranges from $295,500 to $551,000. This includes the franchise fee of $10,000 and other startup costs.