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How Much Does It Cost to Open Mellow Mushroom Franchise?

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

Mellow Mushroom was founded in 1974 by three colleges students who saw pizza baking as an art form and wanted to bring joy to others by exercising their art. The first store was created in an old liquor store near Georgia Tech University in Atlanta, followed by more locations opening around Atlanta.

By the late 1980s, the company began opening franchise locations. Mellow Mushroom has now grown to 100 stores in 16 states, and more locations are under development in Arizona, Colorado, Tennessee and North Carolina. The franchise fee for Mellow Mushroom is $50,000.

The total investment to open and operate a Mellow Mushroom franchise ranges from $926,500 to $3.1 million, with liquid cash available of $300,000. A 5 percent royalty fee on gross sales is paid to the company. Here are areas where you are expected to spend money and the cost associated with it;

Financial Investment Required to Open a Mellow Mushroom Franchise?

1. Initial Franchise Fee: $50,000

Except for the initial franchise fee deposit paid under the Preliminary Agreement and the security deposit, no expenditure in the table below is refundable.

Please note that the amounts listed reflect the build-out of a 3,500 to 6,000 square foot Mellow Mushroom Restaurant based on the franchisor’s design criteria and using average cost analysis from RS Means.

You will not incur most of these costs if you are renewing your franchise because your Restaurant is already open. However, you must make certain upgrades, modifications, and improvements at your Restaurant to meet Mellow Mushroom’s current standards. Your costs will depend on your Restaurant’s current condition.

2. Artwork Package Fee: $40,000 to $48,000

3. Architectural Fee: $60,000 to $80,000

Please note that the architectural fee covers the cost of third-party architect(s) and/or engineer(s) Mellow Mushroom selects and you hire to prepare the Restaurant’s architectural and site plans.

4. One Month’s Rent: $8,500 to $11,500

5. Security Deposit: $8,500 to $11,500

Please note that you may lease or buy the Restaurant’s premises. The Restaurant typically is a free standing unit or in a strip mall in a commercial area. It is approximately 4,000 to 6,000 square feet. The Restaurant’s size depends on many factors, including the ability to place coolers and freezers outside the Restaurant and the number of seats Mellow Mushroom requires.

If you lease the premises, rent and security deposit depend on the site’s size, condition, and location and the demand for the site among prospective lessees. This estimate reflects rent and security deposit for 1 month, but your rent and security deposit could be higher depending on the site’s particular characteristics, especially if it is in a large metropolitan area.

“Shell Premises” means the unfinished retail space typically provided by a landlord when leasing the premises.

6. Equipment: $250,000 to $300,000

Please note that the required equipment includes ovens, sinks, stoves, dishwasher, freezer, slicers, cooler, water heaters, and ice makers.

7. Leasehold Improvements: $550,000 to $900,000

Please note that leasehold improvements, including wall treatment, floors, counters, painting, window coverings, electrical, carpentry and related work, and contractor’s fees, depend on the site’s size, condition, and location; the build-out required to make the premises suitable for your Restaurant; landlord allowances; and other factors.

8. Signage: $40,000 to $60,000

9. Opening Inventory: $40,000 to $60,000

Please note that you must have an adequate supply of food and beverage products, small kitchenwares, cleaning, paper and packaging supplies, beverage cups and lids, report forms, and marketing materials. You may buy these items from Mellow Mushroom or independent, approved suppliers.

10. Small Wares: $23,000 to $26,000

11. Pre-Opening Labor and Training Expenses: $80,000 to $90,000

Please note that this covers travel and car rental expenses, hotel and food rates, and compensation for your principals and employees attending Mellow Mushroom’s required initial franchise training program. It also covers pre-opening labor at the Restaurant for roughly 125 staff members working an average of 30 hours per week over 2 weeks and making minimum wage.

  1. Insurance: $5,000 to $8,000

Please note that Premiums for your Restaurant’s insurance coverage depend on the insurance company, your state’s workers’ compensation rates, the fire rating on the Restaurant’s structure, the Restaurant’s size, and excess or extra coverages you choose. This premium range covers a 1-month period.

  1. Furniture: $55,000 to $80,000

Please note that Furniture includes tables, booths, chairs, and similar Restaurant items.

  1. POS System and Other Back-Office Computer System: $30,000 to $50,000
  2. Audio Visual Equipment: $30,000 to $80,000
  3. Miscellaneous Opening Costs: $10,000 to $12,500

Please note that these include utility, vendor, and sales tax deposits, business licenses, a liquor license, and legal, accounting, and organizational costs.

So also, the cost of obtaining a liquor license varies from city to city and state to state. While Mellow Mushroom estimates the cost at $5,000, it might be significantly higher in your market area.

  1. Additional Funds – 3 Months: $25,000 to $30,000

Please note that this line item estimates the funds needed to cover your initial expenses during the first 3 months of operation (other than the items identified separately in the table). These expenses do not include any draw or salary for you.

However, this is only an estimate, and it is possible that you will need additional working capital during the first 3 months you operate your Restaurant and for a longer time period after that.

Mellow Mushroom relied on its franchising experience since 1987, and its experience in operating (on and off) Mellow Mushroom Restaurants since 1974, to compile this Additional Funds estimate.

  1. Total Estimated Initial Investment (including real estate lease costs for 1 month): $1,305,000 to $1,897,500

In Summary;

  • Liquid capital required: $300,000
  • Net worth required: $300,000
  • Investment: $926,500 – $3,100,000
  • Franchise fee: $50,000