Chili’s first location was a converted postal station in Dallas, Texas in 1975. The concept was to create an informal, full-service dining restaurant with a menu featuring different types of hamburgers offered at an affordable price. By the early 1980s, there were 28 locations. Today, franchising is a big part of the story and there are more than 1,000 locations.
A few baby back ribs aren’t enough and you want to buy the whole Chili’s franchise but wondering what it costs? We reviewed the Chili’s Franchise Disclosure Document and found that the total estimated investment cost to open a Chili’s franchise restaurant ranges from $2,613,000 to $4,048,000. This includes an initial franchise fee of $40,000 to $60,000 that must be paid to Chili’s, the franchisor.
The ongoing royalty fee paid to the franchisor is 1.25% of gross sales. An ongoing technical services fee of 2.75% of sales is also due each month. The ongoing advertising production fee is 0.5% of sales, and the local advertising program fee is a minimum of 2.5% of gross sales. In addition to a local advertising program, Chili’s has a regional advertising that is a maximum of 4% of gross sales. It also has a national advertising program fee that is currently 2.84% of sales with a maximum of 4% of gross sales. Lastly, there is an ongoing supplemental marketing program fee that is 0.10% of sales.
How Much Money Does a Chili’s Franchisee Owner Make?
Well, you have likely spent in the ballpark of $3,000,000 to open a Chili’s franchise location, so you are wondering how much money you will make? According to industry reports, the average Chili’s does $2,500,000 in sales and has 12% EBITDA profit margins meaning that you could expect to make $300,000 before paying for above store general and administrative expenses.
Chili’s Initial Investment
The total estimated investment cost to begin operations of a Chili’s restaurant ranges from $2,613,000 to $4,048,000. Like many other restaurants, the majority of these expenses are construction, equipment and fixture costs. Her is how the costs break down:
- Initial franchise fee: $40,000 – $60,000
- Leasehold expenses: $6,0000 – $20,000
- Pre-construction: $50,000 – $300,000
- Construction costs: $1,200,000 – $1,400,000
- Site Work: $200,000 – $550,000
- Exterior Signage: $20,000 – $80,000
- Furniture/Fixtures/Sound System/Tvs: $100,000 – $120,000
- Kitchen/Bar Equipment: $350,000 – $400,000
- Opening Advertising: $5,000 – $10,000
- Initial Training: $60,000 – $250,000
- Opening Team Costs: $65,000 – $100,000
- Working Capital: $12,000 – $22,000
- Inventory: $10,000 – $20,000
- Bar/Kitchen Accessories: $50,000 – $60,000
- Liquor License: Varies
- Computer POS: $45,000 – $56,000
- Additional Funds (3 Months): $400,000 – $600,000
- Total Estimated Investment: $2,613,000 – $4,048,000
Chili’s Net Worth Requirement
Maybe you can find the money to build a new Chili’s, but along with that Chili’s is also going to check out your net worth. The current net worth requirement to become a Chili’s franchisee is greater than or equal to $500,000 per acquired restaurant. They will also ensure that you have greater than or equal to $400,000 per restaurant to be developed (ie cash reserves)
Chili’s Franchise Term
The franchise term for a Chili’s franchise is 20 years. The length of the initial franchise term for a Chili’s franchisee will expires on the last day of the last calendar month of the 20th year following the date at which the franchised restaurant is opened for business.
The ongoing royalty fee paid to Chili’s is 1.25% of gross sales. This amount is payable by the 10th of each month and must be accompanied by a monthly financial statement.
Chili’s Advertising Production Fee
The ongoing Chili’s advertising production fee is 0.5% of gross sales, payable by the 10th of each month. You must pay the production fee regardless of the advertising program designated by Chili’s. Production fees are used to maintain, direct, administer and prepare advertising and promotional activities, including creative costs.
Chili’s Local Advertising Fee
The ongoing local advertising fee is a minimum of 2.5% of sales. This is due as incurred by you, with quarterly reports to Chili’s the franchisor. If Chili’s requires you to participate in a local advertising program, you must spend at least 2.5% of gross sales on local advertising and may spend more if you choose to do so.
Number of Chili’s Restaurants
At the end of 2018, there were 1,251 Chili’s restaurants in operations. This included 940 company-owned restaurants and 311 franchised locations. This was a decrease in 1 restaurant from 2017.