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How Much Does It Cost to Open Kolache Franchise?

Do you want to open a baked food business by buying Kolache franchise? If YES, here is how much it cost to open Kolache franchise successfully. If you are looking towards opening a Kolache Factory Franchise, it will be nice for you to have a preview of what the company represents before going ahead to enquire about the total cost of opening the franchise in your location.

Kolache Factory was founded in 1981 and they began franchising in 2000, about 20 years ago. The current CEO is John Banks and they have their corporate head office at 23240 Westheimer Pkwy., #A Katy, TX 77494, USA. As of the 2017 Franchise Disclosure Document, there are 36 franchised Kolache Factory locations in the USA. The largest region is the South with 25 franchise locations.

Kolache Factory offers its customers the opportunity to “Eat Different.” By providing their customers with savory, freshly baked foods that look different from other products, that are available in a variety of delicious, different flavors, and are appropriate to consume at different times of day, they have effectively responded to consumer demand for something wonderfully different.

Kolache Factory is committed to developing exciting, new taste sensations. Their dedication to this ideal is reflected in their extensive, ever-expanding menu. As a company that responds to consumer trends, they are continually introducing kolaches in a variety of new flavors, including regional, ethnic and holiday flavors.

Their franchisees benefit from having the ability to offer kolaches in a wide assortment of delicious flavors, without the need to change the basic kolache formula. Here are areas where you are expected to spend money and the cost associated with it;

Financial Investment Required to Open a Kolache Franchise

1. Initial Investment Range: $415,230 – $696,900

2. Franchise Fee: $44,900, ($18,000 (1st + Option Fee Credit); $28,000 thereafter)

3. Development Fee: $7,000 x number of franchises you commit to develop

Note that the initial franchise fee was reduced from $35,000 to $25,000 for the 2011, 2012, 2013, 2014, and 2015 calendar years. The low estimate assumes this is your first and only franchise. The high estimate assumes that you commit to develop a total of three Stores and have signed a Development Agreement. The amounts do not include any management fees for review of alternative vendors or suppliers.

4. Real Estate Acquisition and/or Lease Costs: Amount Not Specified

5. Rent, Security, and Utility Deposits: $3,330 to $10,000

Please note that this Assumes a lease deposit equal to one month’s rent. Utility deposits vary from locale to locale.

6. Architectural, Engineering, and Legal Fees: $18,000 to $25,000

7. Leasehold Improvements, Construction: $150,000 to $220,000

Please note that if you do not own a bakery cafe site, you must purchase or lease the building for your Store premises. Stores are typically located in strip shopping centers or shopping malls and range in size from 1,600 to 2,000 or more square feet. Any location you lease will have to be built out or remodeled to the company’s specifications.

The low estimate presented in the table for leasehold improvements does not include a drive-thru or full-service espresso bar, and the low estimate contemplates a landlord finish-out allowance of $13,000 to $20,000. The allowance, if any, that you negotiate with your landlord may be higher or lower.

Mall and free-standing locations are typically more expensive to build-out than strip center locations, so leasehold improvement expenses in these locations may be higher.

8. Cabinetry and Millwork: $20,000 to $26,000 (+ fuel surcharges)

9. Equipment, Furniture, and POS System: $130,000 to $200,000

Please note that all equipment must be purchased new and must be chosen from the list of brands the franchisor has approved. The estimate does not include espresso bar or drive-thru equipment.

10. Grand Opening Expenses (net of up to $3,000 match by franchisor): $2,000 to $3,000

Please note that The Grand Opening Package currently consists of business card artwork; 1,000 printed cards; menu art and 500 menus; an opening inventory of gift cards and artwork; window posters; one “Coming Soon,” one “Grand Opening,” and one “Now Open” advertisements in a local newspaper; “Grand Opening,” “Coming Soon,” and “Now Open” banners; “Grand Opening” flyers; 15 and 30 second “Grand Opening” radio scripts; wall posters; one Val-Pak or equivalent mailer for two zones in your Trade Area; counter mats; and gator boards.

11. Signage: $5,000 to $9,000

Please note that Municipal code and lease restrictions on signage may increase the cost of your signs. The estimate is for one exterior sign, and does not include drive-thru menu boards.

12. Manager Training: $3,000 to $22,000

Please note that you must hire your personnel before they attend training. You must also carry worker’s compensation insurance in compliance with the Franchise Agreement. The amounts assume salary, travel, lodging, meal, and incidental expenses for yourself and two managerial-level individuals to attend the required training program.

13. Initial Inventory (Food, Paper Goods, and Gift Cards): $8,000 to $10,000

14. Office Supplies, Uniforms, Freight, Miscellaneous Expenses: $5,000 to $15,000

15. Additional Funds and Working Capital – 3 Months: $20,000 to $40,000

Please note that these figures assume you will need the indicated amounts for rent, utilities, wages, inventory purchases, employee training, insurance premiums, debt service, legal and accounting fees, and other expenses during the initial phase of your Store’s operation, which the franchisor estimates to be three months. You may incur additional expenses in starting up your Store.

16. Royalty Fee: 6 percent of Gross Sales

And the Due Date for this fee is Paid by electronic funds transfer every Friday for the preceding Reporting Period. The amount of the Royalty Fee for any renewal term will be that provided in the Franchise Agreement executed for such renewal term.

Please note that “Gross Revenues” include all revenues generated from the provision of any and all services and/or the sale of any and all products and, whether by the franchisee or a third-party provider, that relate to or arise from the Franchised Business. It does not include taxes collected from customers.

17. Local Advertising Spend, Local Marketing Fund, or Cooperative Advertising Contribution

At least 1 percent per calendar year and the Due Date: for this is Monthly. Please note that each local advertising Cooperative may elect to increase the monthly contribution if approved by a two-thirds majority of the members, and the minimum contribution is subject to adjustment by an amount not to exceed the increase in the CPI.

Centers owned by Kolache Factory and its affiliates are also members of their respective local Cooperative and each company-owned Center has the same voting rights as the franchised locations within the Cooperative. If the company-owned Centers comprise the majority of a given Cooperative, the maximum and minimum fees for that Cooperative will be consistent with the range stated in this Item 6.

  1. Liquidated Damages Under Area Development Agreement: This fee varies but the Due Date is Payable within 30 days of the termination of the Development Agreement.
  2. Audit Costs: All costs and expenses associated with the audit, reasonable accounting and legal costs.
  3. Indemnity: This fee will vary under the circumstances and the Due Date is As incurred.

Please note that you must reimburse Kolache Factory if it is held liable for claims arising out of your franchise operations.

  1. Insurance: Reimbursement of costs the franchisor’s out-of-pocket costs.
  2. Attorneys’ Fees and Costs: Will vary under circumstances. (Due Date:  As incurred.)

Payable to Kolache Factory if it is forced to retain independent counsel and seek damages or injunctive relief to enforce the Franchise Agreement (whether or not suit is filed) or if Kolache Factory is required to defend your unsuccessful claim against it.

  1. Veteran Incentives: This is open for negotiation with the company
  2. Term of Agreement and Renewal: The length of the initial franchise term is 10 years. If requirements are met, franchisees can renew for one additional term of 10 years.
  3. Financial Assistance: Kolache Factory has relationships with third-party sources which offer financing to cover the following: franchise fee, startup costs, equipment, inventory, accounts receivable, and payroll et al.

In Summary,

  • Initial investments: $415,230 – $696,900
  • Net-worth Requirement: $500,000
  • Liquid Cash Requirement: $150,000
  • Ongoing Initial Franchise Fee: $44,900
  • Ongoing Royalty Fee: 6%
  • Ad Royalty Fee: 3%