Do you want to start a restaurant by buying Papa John’s franchise? If YES, here is how much it cost to open a Papa John’s franchise and their requirements.
A Papa John’s franchise is a turnkey solution to establishing your own pizza delivery store, as the chain offers a comprehensive startup package which includes everything from extensive training to project management of acquiring, fitting, marketing and launching your store. The initial franchise agreement is normally for 10 years, and can usually be renewed for free.
Papa John’s offers a surplus of support to help franchisees become successful. These resources include a team of franchise business directors, regional marketing directors, and operations specialists that analyze all facets of your franchise business from the inside out. This includes site selection assistance, IT systems, risk (insurance) services, and quality management.
Papa John’s also offers its exclusive PJ Food Service as the franchisee’s one-stop shop for nearly all the ingredients and supplies that franchisees will ever need, including paper items and cleaning supplies. Access to this service is one of the reasons the franchises are so profitable since the generalized supply chain keeps costs extremely low.
Papa John’s Pizza is relatively simple to get into compared to other restaurant franchises. The net worth requirement is reasonable, and the royalty is a standard 5 percent that’s renewable every 10 years. Absentee ownership is doable, and Papa John’s actually encourages that you not have quick-service restaurant (QSR) experience.
However, the company does offer a six-eight week initial managerial and profit-enhancing training program in exchange for that franchise fee. The experience can be particularly valuable whether you want to be a hands-on owner or stand in the wings. Ongoing training is available for both you and your team.
Financial Requirements and How Much It Cost to Open Papa John’s
Papa John’s is currently trying to recruit franchisees to open new restaurants by offering huge discounts to potential franchisees in the US. The cost of franchising a Papa John’s restaurant is already relatively cheap, compared to other fast-food restaurants like McDonald’s or Taco Bell. Papa John’s says operators can open a unit with an investment of about $300,000.
By comparison, McDonald’s requires between $1 million and $2.2 million in startup costs, and Taco Bell requires a minimum investment of at least $1.2 million. According to the company’s FDD, below are the financial requirements of starting and running a Papa John’s Franchise;
- Initial Franchise Fee: $25,000
- Real Estate Brokerage Fees: $10,000
- Professional Fees: $1,000 – $12,000
- Construction/Leasehold Improvements: $500,000
- Furniture, Fixtures and Equipment: $120,000
- Information System: $30,000
- On-Site Support Fee: $2,500
- On-Site Installation and Support Fee: $5,000
- Help Desk Service Fee: $1,000
- Software Enhancement Fee: $420
- Signage: $3,000 – $20,000
- First Month’s Rent: $5,000
- Security Deposit and Other Deposits, Insurance Premium: $1,000 – $8,500
- Opening Inventory and Supplies: $2,000 – $10,000
- Grand Opening Advertising: $10,000
- Training Expenses: $2,000 – $15,000
- Miscellaneous Opening Costs: $2,500 – $20,000
- Additional Funds – 3 months: $15,000 – $50,000
- Royalty: 5% of Net Sales of the restaurant for each Period; 6% for Small Town Non-Traditional Restaurants.
- On-Line Transaction Fee: 1.5% of Net Sales via Internet on-line ordering.
- Transfer: $4,000, or if transfer is of multiple Restaurants to more than one unaffiliated transferee, $4,000 per transferee.
- Renewal: $4,000; $1,000 for a Small Town Non-Traditional Restaurant.
- Audit Expenses: Cost of audit, understatement plus interest at 12% per annum.
- Management Fee: Compensation, travel and living expenses of the appointed manager and a per diem fee of $200.
- Costs, Attorneys’ Fees and Pre-judgement Interest: Will vary under circumstances.
- Indemnification: Will vary under circumstances.
- Marketing Fund Contributions: Up to 3% of Net Sales unless higher amount approved by 2/3 majority vote of Members. As of the date of this Disclosure Document, 4.25%. Non-Traditional Restaurants pay 25% of the standard rate.
- Papa Card Transaction and IVR Fees: 2% of Papa Card redemption -transactions, unless the franchisor approves a higher rate.
- Cooperative Contributions: 2% of Net Sales. Franchisee can opt to take the Cooperative contribution rate down to make the total Marketing Fund contribution rate 7% of Net Sales. This can be done with majority vote of restaurants in the Cooperative or by agreement. Coop members may opt to pay the higher amount, so current highest contribution rate may well exceed 2.5%. Non-Traditional Restaurants pay 25% of the co-op’s contribution rate for standard restaurants.
- Local Advertising: 8% of Net Sales, less amounts contributed to the Marketing Fund and Cooperative; Minimum 2% of Net Sales for Small Town Non-Traditional Restaurants.
- On-Site Installation and Support Fee: $2,000 for a standard 2-day installation, $1,000 per day for each additional day. The franchisor may increase this fee.
- Software Enhancement Fee: $140 per month. The franchisor may increase this fee.
- Help Desk Service Fee: Flat fee of $70 per month or per call fee of $80 per hour with a 1/2 hour minimum. The franchisor may increase this fee.
- Required Purchases: Will vary under circumstances.
- Training Fees: $100 per year per restaurant.
How to Get and Open a Papa John’s Franchise
Papa John’s reiterates that you can own as many units as you want, so long as you have the required net worth to purchase and support them. Minimum net worth for one unit is $250,000. Four to 10 units are $1 million, and 11-plus units require $2 million in net worth and are generally purchased by a group of like-minded investors.
If you believe you qualify financially to acquire a Papa John’s franchise, below is a detailed process of achieving your goal of owning one of the topmost pizza franchise in the world.
1. First, you have to fill the application at the Papa John’s website at www.papajohns.com
Be sure to attach a current resume to the completed application. Filling out the application is free and doesn’t obligate you to open a franchise with Papa John’s.
When you submit the application, you authorize Papa John’s to run a credit report as well as an investigative consumer report. Note that these reports analyze your financial ability to purchase and sustain a franchise. If you’re considering the franchise with a partner or as part of a group, each member must submit a separate application.
2. Ascertain that you have the needed financial backings.
Your net worth must be at least $150,000, $50,000 of which must be liquid. You must also have access to financing of up to $200,000. The fees cover an initial $25,000 franchise cost for each restaurant you open. In addition, you pay 5 percent of monthly net sales to Papa John’s in royalty and 7 percent of monthly net sales to fund both national and local marketing. You must spend $9,000 per restaurant on marketing for the grand opening.
3. Confirm you have the correct background required by the franchise.
Papa John’s expects at least one person who owns the franchise to have business management background. The person who would manage the franchise must also have general management experience. If the franchise is being funded by a partnership or group, the person tasked with operating the franchise must be able to acquire a minimum of 5 percent of the business within 12 months of joining the franchise group or partnership.
4. Put together an extensive plan that shows the parent company how you will fund and develop the franchise restaurant. Papa John’s will respond with a request for financial documentation that supports your financial position.
5. Read, sign and return the Franchise Disclosure Document upon receipt.
This document provides more in-depth information about Papa John’s finances and management process for franchisees. It also makes available existing franchisees who will talk candidly with you about operations, margins and sales.
6. Visit Papa John’s world headquarters in Kentucky. During the visit, thoroughly review how Papa John’s works with its franchisees.
7. Sign the franchise agreement and start developing the store detail, if approved by Papa John’s Franchise Review Board.
Franchisees have access to marketing data, training, food suppliers and marketing plan support. Also, Papa John’s supplies support for all elements of restaurant openings, from site selection and restaurant design to marketing plans, if desired.
One factor you should note about Papa John’s Franchise is that the mandatory marketing budget takes a measure of control and flexibility out of an owner’s hands. It fails to take into consideration that you might be able to hire a talented marketing firm at a lower price.
Note that this aspect is sure to factor into the brand’s low franchise percentage fee since many star marketing directors could be hired for a lower price than the Papa John’s marketing fee.
Also, the low upfront cost, net worth requirements, and fees associated make a Papa John’s franchise seem like a worthwhile investment for a savvy investor. There are factors outside of the brand, such as location and competition, that will affect a franchise’s bottom-line, but it is hard to find another franchise that boasts both this type of brand power at such an affordable startup price.