The Applebee’s chain was founded by Bill and T.J. Palmer in 1980. They wanted to crate a neighborhood feel and quality food at a lower price than competition. The first location was named T.J. Applebee’s Rx for Edibles and Elixirs. Eventually, the concept was sold a few times and dropped the nonsense at the end of the name.
By 1991, Applebee’s became a publicly traded company and by 1998 Applebee’s opened their 1000th restaurant. Today, franchising is a big part of the Applebee’s story.
Ready to take the plunge and look at an investment in an Applebee’s franchise but wondering how much it will cost? We reviewed the Applebee’s Franchise Disclosure Document and found that the cost to open a new Applebee’s ranges from $2,008,364 to $7,654,395. This includes the initial franchise fee of $35,000 that must be paid to the franchisor.
The ongoing Applebee’s royalty fee is 4% of gross sales paid to the franchisor. The ongoing National Advertising Fee is currently set at 4.25% of total gross sales. There is currently no required local advertising fee required.
How Much Money Can You Make as an Applebee’s Franchisee (Owner)?
According to the FDD, average weekly sales of an Applebee’s restaurant is $46,695. This equates to $2,428,000 in annual sales. On that nearly $2.5M in sales, on average a franchisee will make profits of around $310,000 before paying for taxes, interest expenses or above store general & administrative costs.
Is that a good investment? Well, if you make $310,000 on a $4,000,000 investment then that is less than a 10% return. You may want to look around at other franchise opportunities to compare this while speaking to your financial adviser.
Applebee’s Initial Investment
The Applebee’s initial investment cost ranges from $2,008,364 to $7,654,395. Like many other restaurant franchises, the majority of this cost is associated with the building and remodeling costs of the restaurant. Here is how the initial investment breaks down:
- Initial Organizational and Training Expenses: $75,000 – $120,000
- Purchase of Land: $300,000 – $2,000,000
- Building Costs: $556,000 – $2,600,000
- Site Work: $50,000 – $500,000
- Professional Services: $30,000 – $211,000
- Permits / Fees: $1,500 – $75,000
- Furniture, Fixtures, Equipment & Signage: $410,000 – $750,000
- POS System: $20,000 – $45,000
- Kitchen Display System: $12,000 – $18,000
- Smallwares: $25,000 – $35,000
- Initial Inventory: $25,500 – $47,300
- Pre-Opening Expenses: $55,000 – $100,000
- Applicant’s Fee: $0 – $15,000
- Franchise Fee Deposit: $0 – $10,000
- Initial Franchise Fee; $35,000
- Initial Advertising Expense: $5,000 – $40,000
- Liquor License: $500 – $400,000
- Apple Supply Chain Co-Op Stock Purchase: $0 – $100
- Online ordering: $56 per month
- Europay, Mastercard, Visa: $1,500 – $3,000
- Wifi: $90 – $400 per month
- Digital Service Fee: $150 – $350 per month
- Server Tablet Maintenance Fee: $0 – $1,000 per year
- Implementation Fees: $240 to $450
- Gateway Processing Fee: $66 per month
- Waitlist: $0 – $69 per month
- Campaign/Menu Training: $30 per year
- Training: $120 per year
- Extra Manuals: $0 – $250
- Food Safety: $0 – $1,184
- Additional Funds – 3 Months: $405,000 – $655,000
- Total: $2,008,364 – $7,654,395
Applebee’s Net Worth Requirement
According to Applebee’s, they are looking for an experienced and well capitalized multi-unit operator who is probably operating restaurants already with another brand. They typically require a minimum of $1.0 million in net worth for each restaurant to be built, along with substantial cash assets for initial restaurant construction. As they state on their website, “It is also important our franchisees have sufficient funds to cover working capital costs and startup costs, which are substantial.”
The Applebee’s ongoing royalty fee paid to the franchisor is 4% of gross sales. This percentage can be increased by the franchisor after January 1, 2020. Royalties are due monthly on the 12th day of the next month. Gross sales includes all revenues from the Restaurant. Gross sales do not include sales or use taxes.
Applebee’s National Advertising Fund
The ongoing fee paid for the national advertising fund is 4.25% of total gross sales. This amount can be increased or decreased by us at any time. National advertising fees are paid at the same time as royalties on the 12th day of the month.
Applebee’s Local Advertising Fees
There is currently no required local advertising fee. That said, Applebee’s can require you and another franchisee in the same market to form an advertising cooperative and split the local advertising fees.
Number of Franchised Store
At the end of 2018, the number of Applebee’s restaurants was 1,700. This was a decrease from 1,788 stores in 2017. Of these 1,700 stores, 1,631 stores are franchised and 69 are company owned. These were company stores that were acquired in 2018 from franchisees.