For investors considering starting a franchise in the food sector, we have outlined how much the KFC franchise costs. Also, we reveal how much royalties this franchisor charges and how much profit/salary per year KFC franchise owners can expect.
- Launching a new KFC franchise in a traditional location will cost investors between $1.4M and $3.2M.
- Franchisees are obligated to pay 10% of their gross restaurant sales for fees associated with franchisor royalties.
- KFC franchises, on average, make $1,348,407 in gross revenue per location and deliver 7 to 8% of profit margin to their owners.
- The owner of the average earning KFC franchise can expect to make between $95,000 and $105,000 by owning this restaurant.
- KFC, formerly known as Kentucky Fried Chicken, has been in business since 1930, which makes them one of the oldest restaurant brands in the U.S.
How Much Does The KFC Franchise Cost
The total investment cost for starting KFC franchise in Traditional location is between $1,440,525 and $3,165,550 with Initial Fee that is between $45,275 and $50,500 per location.
Not every location of this brand costs the same, so investors must understand what type of franchise this franchisor offer for purchase!
Available KFC types of franchise locations:
- Traditional: New free-standing buildings, with lots approximately 175 feet wide and 200 feet deep.
- Non-Traditional: Operate within a larger facility, such as an airport, stadium, convention center, retail center, employee cafeteria, school, hotel, etc.
- Remodeled/Reopened: Existing locations that were formerly owned by KFC corporation or its franchisees.
The total investment cost necessary to launch a reopened or remodeled former KFC franchise location goes between $1,006,525 and $2,397,550, with included Initial Fee between $45,275 and $50,500.
Launching a KFC franchise in Non-Traditional Locations demands investment costs between $255,525 and $1,178,500, with an initial fee of between $22,775 and $27,500.
As we can see from above, the most affordable investment option is to start a KFC restaurant in a non-traditional location. Launching a new franchise in a traditional location will demand an investment cost between $1.4M and $3.2M!
Table of initial costs for Traditional and Remodeled/Reopened Locations:
- Background Check Fee: $275 to $2,500 per person
- Deposit Fee: $20,000
- Option Fee: $25,000
- Training Expenses: $5,000 to $8,000
- Permits, Licenses & Security Deposits: $50,000 to $100,000
- Real Property: $400,000 to $1,100,000
- Building & Site Costs: $534,000 to $1,300,000 (for reopened locations this cost is between $100,000 and $532,000.
- Equipment, Signage, Décor, POS & MERIT: $329,000 to $500,000
- Start-up Inventory: $10,000
- Grand Opening Expense: $5,000
- Insurance: $7,250 to $10,050
- Miscellaneous Costs: $5,000 to $10,000
- Additional Funds: $50,000 to $75,000 / Working Capital for first 3 months
- ESTIMATED TOTAL INVESTMENT COST: $1,006,525 to $3,165,550
Only in rare cases do investors have the option to reopen a previously closed KFC restaurant. However, suppose you notice that the current franchised location has recently closed its door in your desired territory. In that case, you can apply to reopen it and benefit from a reduced initial investment cost.
Options To Fund KFC Franchise Initial Investment Cost
This franchising corporation does not offer, directly or indirectly, any arrangements for financing total initial investment costs, so investors will need to search for third-party funding sources!
However, Yum Brands, owner of the KFC corporation, offers an optional lending assistance program for qualified minorities!
Yum Minority, Lending Assistance Program, can use Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, and other minorities. Investors that get the franchisor green light for them Yum will guarantee 25% of the principal of the business loan!
KFC Franchise Fees
KFC corporation charges its franchisees an Initial Franchise Fee of $45,000. It is paid in two parts the Deposit Fee; and the Option Fee.
The Deposit Fee is $20,000, and an Option Fee is $25,000, so this franchisor has to take a slightly different approach in collecting the Initial Fee than other franchising systems have.
To make it easier for investors to understand how much they will need to pay, we have added up all initial fees and put it cost under the Initial Fee of $45,000!
Royalty Service Fee
KFC charges its franchise owners royalties in ammount of 4% to 5% of Gross Revenue for Traditional Locations and 9.5% of Gross Revenues for Non-Traditional Restaurants.
This fee is paid every month during the whole duration of the franchise agreement! From it, the franchisor charges its franchisees for services and assistance that it provides to them.
KFC franchised restaurants are required to pay the National Advertising Fee, which is 4.5% of Gross Revenue, and must spend 0,5% of their revenues on local marketing.
These two marketing fees combined are, in total, 5% of gross revenue!
So every new franchise owner must understand that they will need to redirect a certain amount of money to the franchisor’s bank account to finance advertising campaigns conducted nationally or locally.
KFC franchised location must pay to franchisor 3.5% of Gross Revenue collected from all Digital Orders.
Digital Orders are considered all orders placed via digital platforms channels and third-party aggregators, such as KFC.com, GrubHub, DoorDash, UberEats, PostMates, and other digital ordering services.
Investors must be aware that online selling has become the norm even for the food industry, and a lot of the revenue will come from these websites that deal with digital orders.
So if you consider launching a new KFC franchise, you must count on this cost while estimating the potential profit potential of this business!
Also, there is an annual cost of maintenance, updating, upgrading, and support for the Outlet’s Computer System, which costs $1,500 per location.
Average lots for launching new free-standing KFC franchised restaurants are approximately 175 feet wide and 200 feet deep. So leasing or renting this type of space will be one of the highest operating costs that franchisees will need to pay every month.
Land and lease costs vary depending on the geographical position of the franchised location, so investors need to estimate this cost according to the real estate market situation in their State.
Investors must watch out that their monthly lease outlay doesn’t eat all profit margin from their KFC Franchise, usually cost of 6% to 8%of the gross revenue for real estate rent is bearable in terms of the overall profitability of the business.
A good practice is negotiating with the landlord to lease payment outlay based on Gross Revenue; this can also be a good choice for franchise owners and landlords!
How Much Is KFC Franchise Profit
Average Gross Revenue Per Year
KFC franchises, on average, make $1,348,407 in gross revenue per location. In 2021, 43.8% of franchised restaurants exceeded average gross sales.
In 2021 the range of gross sales for franchisee-owned KFC restaurants was:
- The lowest franchise unit has $322,933 in gross restaurant sales
- The highest earning location has made $3,615,549 in gross sale
KFC Profit Margin
KFC franchise owners can expect their business to deliver a 7% to 8% profit margin from all sales their restaurant makes per year.
When we add up the cost of the product, labor, rent, and franchisor royalties, the real estimation is that 7% to 8% of all sales money will stay in the owner’s pocket at the end of the year!
Although this percentage of profit margins can seem as low at first, this is an average that usually and other better-known franchising systems deliver. The food industry is not as profitable as some other industries because franchisor royalties take a big chuck of owner margin at the end of the year.
How Much is KFC Franchise Owner Salary
The owner of the average earning KFC franchise can expect to make between $95,000 and $105,000 of salary per year.
These franchises are one of the most profitable due to the fact that they on have high gross sales per year. How much do particular KFC franchise owners make will depend primarily on location!
To be able to fulfill the averages that these restaurants deliver in sales, the franchise applicants need to find a location with a high fluctuation of people/potential customers inside the territory that lack food service businesses.
How We Estimate KFC Franchise Owner Salary Per Year
We make an estimation of the KFC franchise owner’s salary per year according to the financial data that this franchisor has revealed in the Franchise Disclosure Document.
From Financial Statement incorporated in the FDD, we have insight into KFC’s average, highest, and lowest performing gross revenue franchised restaurants.
Is Profitable to Own KFC Franchise
Yes, owning a KFC franchise can be very profitable if the owner can fulfill the average or exceed the gross sales amount that this franchised restaurant usually delivers to its owners.
With an estimated owner salary between $95,000 and $105,000 per year, this franchising concept has exceeded almost double the average that is franchising industry usually delivers.
Because of all said, we can conclude that launching this franchised restaurant can be a very lucrative business venture!
Do KFC Franchisees Have Protected Territory
KFC franchisees have a protected territory within a radius of 1.5 miles of the outlet or around the franchise location where 30,000 people reside.
However, franchisees do not have exclusive territory rights, which means that other franchises/affiliates from a corporation that owns this brand can operate business near the KFC location.
Who Owns KFC
KFC owner is Yum! Brands, the franchising corporation that also owns Pizza Hut, Taco Bell, and Habit Burger Grill trademarks.
Requirements to Own KFC Franchise
The KFC franchise applicants must have a Net Worth of $1,500,000 and own $750,000 of Liquid Assets(Cash) in order to be approved as a new franchise owners.
Background Check Requirement
This franchisor conducts a background check of all their franchise applicant; the investors are required to pay a background check fee, which costs between $275 to $2,500 per person.
Owner’s Participation Requirement
No requirement obligates KFC franchise owners that they must be present day to day on their franchised locations. However, during the Franchise Agreement, a fully-trained and qualified unit manager must devote full time to the management and operation of the outlet.
Personal Guaranty Requirement
If a new KFC franchise is launched by the corporation, entity, or partnership, each owner/ partner who owns 10% or more of the business entity must sign a personal guarantee.
The personal guarantee cap is calculated according to the number of franchise units that the business entity has launched.
KFC Franchisee Training
The future onsite manager of the KFC franchise is obligated to pass Restaurant Leader’s and Key Operator’s initial training program!
The training is consisted of computer-based online learning, on-the-job training at other Outlets, and classroom instruction.
The individual who completes the Key Operator program trains employees, which reduces the cost that usually other franchising systems charge to perform employee training at their arrangement.
How Much Is KFC Franchise Agreement Duration
The length of the KFC franchise agreement is 20 years, and after it passes, owners need to pay Renewal Fee, which is $9,000, to continue doing their business under brand trademarks.
Is it Possible to Terminate KFC Franchise Agreement?
Yes, it is possible to terminate the KFC franchise agreement, but the owner must inform the franchisor 30-days in advance with written notice about closing the outlet!
After closing its KFC Franchised restaurant, the owner doesn’t have the right to operate a similar business for one year within 10 miles of the outlet.
In practice, this means you, as a former franchisee, don’t have the right to continue doing business at the same real estate/ location with other trademarks.
Are All KFC Franchises
Franchisees own 90% of all KFC restaurants, and the rest are corporate owned. Currently, there are approximately 4000 franchise owned and only 47 corporate-owned KFC in the U.S.
KFC, or Kentucky Fried Chicken, is the second biggest franchising concept in the world. Only McDonald’s has more franchise units than this company, which says a lot about the popularity of this brand.
The KFC franchise starting cost is high, but these restaurants are always full, so owners can expect high gross sales and a good salary at the end of the year.