Culver’s is a family-owned fast-food restaurant chain founded in 1984 in Wisconsin. Today this brand has more than 800 franchise units in 25 U.S states. They are currently seeking new franchisees, so this franchising opportunity will be interesting to all investors who wish to get involved in the Fast Food Industry.
Although opening this restaurant involves high investment, this franchisor assists in starting approximately 40 new franchised restaurants every year. So our main goal is to deliver to potential franchisees accurate data about Culver’s franchise cost, fees, and profit that the owner can make.
How Much Does The Culver’s Franchise Cost
The estimated cost of starting Culver’s franchise is between $2,398,000 to $5,432,000; this financial prediction includes the $55,000 for the Initial Franchise Fee and all other expenses until the opening day.
This company’s franchised restaurants usually are stand-alone facilities with a drive-thru, and because of that, starting costs are high. The investor can choose to buy or rent land, rent or buy an already built building with appropriate land and then improve that location according to the franchisor’s requirements.
So precise Culver’s franchise cost will depend on how much money the franchisee will need to invest in the future franchise location. The cheapest option will be to find some appropriate stand-alone facility and lease it.
But, In the long run, it would be a more profitable choice to buy land and build a new facility on it, but we are aware that many investors have a limited starting budget, so this is not a realistic option for them.
In the end, it will all depend on the investor’s wishes and his financial possibilities. But every potential franchisee must be acquainted that in ideal circumstances, starting this brand restaurant will cost at least $2,400,000.
Culver’s franchise list of starting costs:
- Initial Franchise Fee: $55,000
- Building: $1,121,000 – $1,619,000
- Land: $330,000 – $1,800,000 – 45,000 to 60,000 square feet
- Site Work: $258,000 – $906,000
- Furniture, Fixtures Equipment and Supplies: $395,000 – $510,000
- Sign Package: $106,000 – $220,000
- Initial Inventory: $35,000 – $50,000
- POS System: $43,000 – $52,000
- Expenses during Training: $20,000 – $80,000
- Miscellaneous Expenses: $20,000 – $40,000
- Working Capital (first 3 months): $50,000 – $100,000
- Estimated Total Investment: $2,398,000 – $5,432,000
Every investor who wants to apply for this franchise must show that he owns Liquid Capital of $350,000 to $600,000. Also, this franchisor doesn’t offer in-house financing, but it can be an intermediate between third-party funding sources and franchisees.
Culver’s Franchise Fee
The Culver’s franchisee will need to pay a one-time Initial Franchise Fee of $55,000, an ongoing monthly Royalty Fee of 4%, Advertising Fee of 2.5%, and Local Advertising Fee that is 1%; all costs of the ongoing fees are calculated according to Gross Sales.
When we merge all ongoing monthly fees, we come to 7.5% of the Gross Revenue. This franchisor has really low ongoing fees compared to similar franchising companies, which means that Culver’s franchise owner can expect more profit will stay in his pocket.
The advantages of the lower royalties will result in higher Net Income, so this franchise owner can expect better Profit margins than it would be possible to make in partnership with most other franchisors!
Culver’s franchise list of fees:
- Initial Franchise Fee: $55,000 – one-time cost
- Royalty Fee: 4% of Gross Sales – ongoing monthly cost
- Advertising Fee: 2.5% of Gross Sales – ongoing monthly cost
- Local Advertising: 1% of Gross Sales – ongoing monthly cost
- Technology Fee: approximately $300 per month
- E-Learning Program Fee: $200 per quarter or $740 annually
- Additional Training Fee: $1,000 per person – for managers of unit
- Additional Assistance Fee: $500 per week – if it is requested
- Custom Design Fee: Up to $5,000 – if it is requested
- Extraordinary Building Assistance Fee: up to $30,000 – if requested
- Building Conversion Fee: Up to $5,000 – if it is needed
- Renewal Fee: $30,000 – after expiration of Franchise Agreement
If they are opening their first Culver’s franchise, investors will need to pay the total cost of the Initial Fee; the except are U.S. Veterans, who have the right to a $10,000 discount. The existing franchisees who wish to own more than one restaurant have rights to specific Initial Fee discounts.
Culver’s Franchise Profit
Culver’s franchises make, on average, a Gross Sales of $2,600,000 per year, with a 14% to 21% Profit Margin. So the owner of this franchised restaurant can expect to make an annual profit that will be in the range of $365,000 to $546,000.
The above estimation of Culver’s franchise profit is without deductions for eventual rent costs and all taxes that the franchisee must pay. So all potential investors who want to know how much they can make must include the percentage of the State’s tax where they will operate in their profit projections.
Opening the restaurant of this brand is one of the better franchising opportunities in the Food Industry. The ongoing royalties are relatively low, and the franchises have ongoing operating costs that will leave enough room for owner profit.
Culver’s franchise operating costs:
- Franchisor Service Royalty Fee: 4.0% of the Sales Revenue
- Franchisor Ad Fund Fee: 2.5% of the Sales Revenue
- Local Advertising Fee: 1% of the Sales Revenue
- Food Cost: 30% of the Sales Revenue
- Employees Salaries and Wages: 26% to 30% of the Sales Revenue
- Employee Benefits: 5% to 6% of the Sales Revenue
- Administrative Services Cost: 3% to 4% of the Sales Revenue
- Paper Cost: 2.8% of the Sales Revenue
- Utility Cost: 1.5% to 2% of the Sales Revenue
- Repairs and Maintenance: 1.5% to 2% of the Sales Revenue
- Supplies and Chemicals: 1.5% of the Sales Revenue
- Direct Operating Expenses: 0.5% to 1% of the Sales Revenue
- Operating Profit Margin: 14% to 21% from the Gross Sales
The information about Culver’s franchise Profit Margins, average Gross Sales, and operational expenses are collected from their Franchise Disclosure Document, which means that they present the most accurate data that we can find.
Overview of Culver’s Franchising Opportunity
With approximately 800 franchised restaurants, Culver’s can’t be considered one of the leading brands by the number of franchise units in the Food Industry. But, although it has a very high starting cost, this franchising opportunity can be one of the better business options for investors who have significant financial resources.
The Profit Margin that these franchised restaurants can deliver is excellent, and the Gross Sales that per year Culver’s franchises make put them on the list of the best earners in the franchising industry. This franchisor chooses franchisees carefully, which means that not all applicants will be selected to start a new site.
Culver’s restaurant locations are usually freestanding, and they can seat 88 to 120 guests at one time, which means that a huge amount of money investors will need to spend on constructing this type of building. However, there are also possibilities to open these franchises in Non-Traditional Locations, which will reduce starting costs.
Investors who opt for starting Traditional Locations can make some building improvements, so the design of their franchise can be a little different from the standard ones. However, any modifications of the facility’s plan must be agreed upon with the franchisor, and the franchisee must pay some fees for this.
The franchisor gives standard prototypical building plans and conceptual sketches at no charge. If the franchisee wants to make modifications, these building construction improvements will cost $5,000 to $30,000.
Summary
By starting this franchise, the franchisee gets a proven business model that this franchisor has developed since 1984. In the last ten years, this company has doubled the number of restaurants, which shows that Culver’s is currently on an upward trajectory and that this brand still has a lot of room for growth.
The Culvers franchise cost made this franchise opportunity available only to entrepreneurs with a significant startup budget. But, those investors who can fulfill all franchisor requirements can be sure that they will own a highly profitable franchised business that will multiple initial invested money and bring a secure income many years upfront.