CiCi's where do I start with that.
Hope this helps. Lets start with some basic math that you should do before buying anything.
Q: Rent space ?
Q: Franchise Fee ?
Q: Investment ?
Q: Debt ?
Answer those questions.
Know, lets take Arizona Market for instance.
Restaurant Sqft: 4200 sqft.
Typical rent in Arizona goes for : $25 a sqft in a lower area...So assume $27 with a cam charge.
Rent Cost year: $113,400 ( WOW BIG RENT ) Monthly: $9,450
Assume you did: $900,000 a year
Labor : 28% ( 252,000 a year )
Note: Its hard to think that you can hit labor of 26% with increase in workers comp, hourly wage etc...
Food Cost: 29% = $261,000
Franchise Fee: 4% + 2% marketing = 6%
So your at
Labor + Food Cost + Franchise Fee + Rent ( 113,400 / 900,000 = 13 % ) = 76%
Know add following to it:
Debt: ( All ways assume higher investment cost ) $650,000 to open
20 % down = 130,000 ... Debt: $520,000... Loan 8% for 7 years = $9,657.00 a monthly payment for principle + interest = $115,885 for debt a year.
Labor + Food Cost + Franchise Fee + Rent + Debt = 88.8 %
Know add your general expense such as utilities, uniform, maintain ace, other, etc....Which is 10% typical in restaurant business.
So...
Labor + Food Cost + Franchise Fee + Rent + Debt + General Expense = 98%... .
So your expense is 98% eaving you with 2% profit margin, if you are very good and do it your self and manage your business right, lets say you hit 5 or 7 % profit margin.
So if you do $900,000 a year.... you will make following net income:
At 2 % profit you make $18,000 a year
at 5 % profit you make $45,000
At 8% profit you make $72,000.00
Know, I can BET My life you will not make more than 5 or 6 % of profit if you work hard and save all the cost...Why , simple ? You have high rent and high debt.
In restaurant business... RENT AND DEBT WILL PUT YOU OUT OF BUSINESS.
Problem:
CiCi Pizza are too big of sqft, which in return increases your rent. In addition it has a high cost build out.
IF THE FRANCHISER TELLS you that you can have your restaurant build for $400,000 DO NOT BUY IT, ask them for that exact amount in WRITING and if it cost more than the company is responsible for it.
If a franchise tells you that build out cost is between $400 - 600. Assume the highest , 600... iF they say 400, ask them in writing.
Never take franchiser word for anything.
At the end, is it worth it. NO NO NO.
For $600,000 you basically bought your self a job.
Hope that helps...
My numbers are pretty close...
TRUST ME U WILL NOT MAKE 15 or 20% profit..... IF SOME ONE CLAIMS THAT, than they are idiot.
Remember in lease property, Debt and rent is not consider as of profit.
Never include Debt as your profit... Because end of day what matters is what you take home
Working 50 - 70 hours a week at a restaurant to make $50,000 a year... Not worth it.
Hope this helps in your research.
Ben
