Pita Pit is a Canadian-based restaurant chain founded in 1995. Since then, they have organized openings of more than 500 franchise units in worldwide locations. Most of these franchises are in Canada, but they are also popular in the U.S, so we decided to present how much is starting cost, fees, and potential profit the owner can expect.
Since 1999 they started franchising operations in the United States; at present, they have grown to more than 150 U.S based restaurants. This company guides franchising operations in 13 countries, so information about Pita Pit franchise cost and profit can be of interest also and for international investors.
How Much Does The Pita Pit Franchise Cost
The estimated starting cost of the Pita Pit franchise is between $330,000 to $505,000. In this financial prediction, we included $30,000 for the Initial Fee and all other expenses that the investor will have until the opening day.
The expenses related to leasehold improvements will be more than 50% of the total investment fund; usually, the site’s construction and architectural modifications cost somewhere between $170,000 and $260,000.
Standard Pita Pit franchise location operates in the space of approximately 1,000-1,400 square feet, which means that a lot of the expenses will go for arranging the restaurant’s location. It will be necessary to buy furniture fixtures and all kinds of working equipment; this will cost between $97,000 to $148,000.
Also, this franchisor offers the possibility that franchised restaurant has a drive-thru; those investors who decide to invest in this feature can expect that their Pita Pit franchise cost will be on the higher end of our estimated total investment prediction.
Pita Pit franchise list of starting costs:
- Initial Franchise Fee: $30,000
- Leasehold improvements: $170,000 – $260,000
- All necessary store equipment: $97,000 – $148,000
- Inventory package: $5,300 – $8,500
- Intial Marketing $3,000 – $4,200
- Rent and landlord deposit: $2,400 – $10,000
- Uniforms and store kit: $1,200 – $1,600
- Initial training: $1,000 – $3,200
- Legal and accounting fees: $500 – $2,500
- Computer systems: $1,000
- Insurance: $250 – $700
- Business licenses: $200 – $1,000
- Working capital: $25,000 $31,000 – for first 3 months
- Estimated total investment: $330,000 to $505,000
Pita Pit as a company doesn’t offer in-house financing but offers assistance with external funding sources. This franchisor is pre-approved by the United States Small Business Administration, which means that they can give a franchisee a guarantee for the SBA loan.
Pita Pit Franchise Fee
The Pita Pit franchisees are obligated to pay a one-time Initial Fee of $30,000 and an ongoing Royalty Fee of 5% and 1% of the Ad Fund Fee. These fees the franchisor calculates according to net sales, and the franchisee must pay them regularly every month during the whole duration of the Franchise Agreement.
When we combine these two fees, we get a 6% deduction from the net restaurant sales that the franchisee of this company will need to pay. This percentage of royalties is a pretty standard one, compared with other similar franchising offers.
However, a franchisee is bound to buy food supplies and other necessary materials for operating directly from the franchisor or its affiliates. Usually, products purchased in this way have more cost than ones on the open market, so every potential investor must keep this in mind.
Most franchisors take a rabat of 1,5% on the purchased supplies. But, as Pita Pit has relatively low franchise royalties, a little bit of higher cost for purchasing raw food supplies will not affect the franchised restaurant’s overall profitability.
Pita Pit franchise list of fees:
- Royalty Fee: 5% of net sales – an ongoing cost
- Ad Fund Fee: 1% of net sales – an ongoing cost
- Initial Fee: $30,000 – one time cost
- Transfer Fee: $7,000 – in case if franchisee decides to sell the business
- Renewal Fee: $25,000 – after expiration of 10 years Franchise Agreement
The Initial Fee is only a one-time cost; this franchisor offers a discount on this fee to the Veterans of the U.S Army Forces, so for this group of investors, this fee will be $24,000, which is a 20% discount.
Pita Pit Franchise Profit
The owner of the Pita Pit franchise can expect gross restaurant sales between $400,000 to $600,000 per year with 10-15% of profit margins, which means that the franchisee can make somewhere between $40,000 to $90,000 of annual profit.
This franchisor doesn’t reveal data about their franchised restaurants’ average gross sales in the Franchise Disclosure Document, so we contacted a few franchisees from this brand. After gathering information from already established restaurants, we made this Pita Pit franchise profit estimation.
Although this profit may seem as low, starting this franchised restaurant can be more profitable than owning a franchise from many other brands that are today leaders of the fast-food industry. This franchisor provides a good business foundation, and the franchisee’s task is to push to extract more profit from his franchised unit.
For all those investors that want to start a franchise in an area that needs this type of restaurant, this franchising offer can be a very lucrative business venture. There is not too much competition in the pita sandwich industry, so an owner on the ideal site location can easily overachieve this above Pita Pit profit estimation.
These franchised restaurants on the menu offer a wide variety of pita sandwiches for really affordable prices, which means that owners can’t expect that profit margins on this kind of food product will be huge.
But these affordable prices on the menu can be an ideal basis to establish a Pita Pit franchise location with a large base of regular customers. So if the franchisee applicant chooses the right site location, then it is achievable to make an excellent annual income from this restaurant.
Company Overview
Nelson Lang and John Sotiriadis founded the Pita Pit in 1995 in Ontario, Canada, and with franchising operations, they started in 1997. Today this brand has franchise units in 12 countries, but on the territory of Canada, there is still the most number of their restaurants.
This company opened the first Pita Pit franchise in the United States in 1999; today, they have more than 150 franchised restaurants across the 42 States.
Also, this company has at least one restaurant in New Zealand, India, France, Brazil, Panama, Trinidad and Tobago, the United Kingdom, New Zealand, Australia, Singapore, United Arab Emirates, Ireland, and Sweden.
Pita Pit as a company had a significant drop in business profit in the last few years, and potential franchise owners must be aware of this. In 2018 they had 592 franchise units, and at the end of 2020, 534 restaurants were still presented worldwide.
The most significant decline this franchisor has experienced in the United States. In 2018, there were 219 U.S-based franchises open, and at the end of 2020, there were only 131 franchised restaurants from this company still in business.
So the potential franchisee applicants, especially those from the U.S, must be aware that 171 Pita Pit franchises closed their doors in only two years. But every business has its risks, and franchising is no exception in that regard.
Investors who think to start a Pita Pit franchise must analyze the cost and potential profit ratio and evaluate if this type of business is the right choice for their market area. The best option is to contact former and current Pita Pit franchisees, and in that way, get an insight into the first-hand information.
Summary
Every franchising company at some time had its business downs and ups; some of the leading franchisors experienced business profit decline in the last few years. But, when we review Pit Pit franchise cost and potential profit that owners can expect, we can see that these franchised restaurants deliver pretty standard results for this industry.
The most significant duty for investors will be to conduct market research to see if Pita Pit can offer a new value to the customers of the targeted territory. Suppose it is possible to find a suitable site location in the market area with high demand for this type of food store. In that case, this franchised restaurant can be a very lucrative business opportunity.