In 1958, two brothers (Dan and Frank Carney) borrowed $600 from their mom to open a pizza place in Wichita, Kansas. Where did the name come from? Well, they only had enough space for eight letters on their sign, so they went with Pizza Hut.
Only one year later, in 1959, they opened their first franchise unit in Topeka, Kansas. This location was also the first to provide delivery, an innovation in the Pizza category. By 1971, Pizza hut became the number 1 pizza restaurant chain in the United States and continued its massive growth through franchising.
Today, Pizza Hut is one of the largest pizza franchises with greater than 16,000 stores across 100 countries. Historically, Pizza Hut was the dine-in pizza place, but they are working towards moving towards more delivery/carryout (Delco) stores.
If you like the pizza and wanting in on the action, you are probably wondering what it costs to build a Pizza Hut? We reviewed the franchise disclosure document for Pizza Hut and found that the estimated initial investment for a freestanding delivery and carryout location runs $567,000-$945,000, including a $25,000 franchise fee.
How Much Money Can you Expect to Make as a Pizza Hut Franchisee
So you have dropped $600,000 on your new Pizza Hut location and wondering what to expect from profitability. The average delivery and carryout location will do about $860,000 in sales and bring in $128,000 in profits (before above store general and administrative expenses).
So you make $128,000 on your $600,000 investment. Is that a good return? Well, that equates to a 21% return. You will need to compare that to other places that you can invest to determine if it is a good investment. There are so many Pizza Hut locations that you may also struggle to find green space to build another new location.
Pizza Hut Initial Investment Cost Breakdown
Here is how the initial investment breaks down:
- Initial Franchise Fee: $25,000 (Initial term 10 years)
- Development Fee: $25,000-$50,000
- Equipment: $125,000-$200,000
- Opening Inventory: $4,000-$6,000
- Smallwares: $15,000-$22,000
- Building, Site Improvements: $340,000-$550,000
- Land: Varies
- Delivery Vehicles: 4
- Computers: $15,000-$30,000
- Computer System Training: $0-$1,500
- Additional Funds: $5,000-$21,500
- Miscellaneous: $10,000-$22,000
- Advertising: $0-$10,300
- Start-up “Other”: $3,000-$5,000
- Total: $567,000-$945,300
Pizza Hut Net Worth Requirement
Maybe you can find the money to build a new Pizza Hut, but along with that Pizza Hut is also going to check out your net worth. The current net worth requirement to become a Pizza Hut franchisee is a liquidity requirement of $350,000 with net worth of $700,000.
Royalties, Advertising and Other Ongoing Costs
The major ongoing fees for any franchise include royalties and advertising fees. For Pizza Hut, these sum up to north of 10% of sales. Here is how they break down:
- Restaurant technology fee: $2,500 per store per year
- Monthly Service Fee (Royalty): 6% of gross sales
- System Advertising Fund: 4.75% of Gross Sales
- IPHFHA Dues: 4.75% of Gross Sales (credit against advertising fund as long as Advertising Committee in place)
- Digital Innovation Fees: $0.38 per transaction conducted through digital or other automated channel
Average Financial Performance
The company also breaks down the average financial performance of a company-owned Delco outlet:
- Gross Sales: $868,173
- Average Cost of Sales: $243,263
- Average Cost of Labor: $275,320
- Average Cost of Advertising: $45,631
- Average Semi-variable costs: $85,599
- Average Other Semi-variable costs: $42,772
- Average Fixed Costs – Other: $18,018
- Average Cost of Rent: $28,755
- Average EBITDA $128,359
- Known Franchisee Expenses that are not paid by company-owned $52,090 (6% monthly service fee)