The Chicken Finger craze has become pretty big in recent years and has brought a lot of competitors to the market. It can all be traced back to a little Chicken finger spot in Alabama called Guthrie’s that started in 1965.
While studying at the University of Georgia, Zach McLeroy discovered Guthrie’s and fell in love with the simplicity of the concept. He then joined together with childhood friend, Tony Townley to start Zaxby’s.
Zaxby’s first location popped up in 1990 in Statesboro, Georgia, near the Georgia Southern University. Today, the chain has expanded through rapid franchising, mostly in the Southern United States and has more than 900 locations. 123 of those locations are owned by Zaxby’s corporate so that puts the majority in franchisees hands.
So you are ready to make the plunge into the Zaxby’s franchise but wondering how much the investment costs? We reviewed the Zaxby’s Franchise Disclosure Document and determined that the cost to begin operation of a Zaxby’s Restaurant ranges from $369,800 to $744,200. This includes a franchise fee paid to the franchisor in the amount of $35,000.
The ongoing royalty fee paid to the franchisor is 6% of gross sales per week. The ongoing national marketing contribution is 1% of Gross Sales per week. The ongoing Local Co-op marketing contribution is between 1.5% and 3.5% as determined by the co-op.
How Much Money will you Make as a Zaxby’s Franchisee?
So you dropped a cool $700,000 to build out a Zaxby’s restaurant (excluding the land), and you are looking to see how much money you will make. According to industry reports, the average Zaxby’s restaurant brings in nearly $2.2 million in sales. On those sales, you are likely to make around 8.5% EBTITDA (profits) or around $190,000 before paying above store general and administrative costs.
Is Zaxby’s a good investment? Well, if you spent $700,000 and received a return of $190,000 then that is effectively a 27% return. You will need to compare this amount versus other investment opportunities in consultation with a financial adviser to see if this is a good investment for you.
Zaxby’s Estimated Initial Investment Cost
The estimated initial investment cost for a Zaxby’s restaurant is between $369,800 and $744,200. Like many other restaurants, the majority of these costs are in the leasehold improvements and the furniture and equipment in the store. Here is how the costs break down:
- Initial Franchise Fee: $35,000
- Lease and Deposit Payment: $12,000 – $24,000
- Utility Deposits: $0 – $9,000
- Initial Inventory: $5,000 – $20,000
- Furniture, Fixtures, & Equipment: $243,700 – $362,200
- POS System: $27,700 – $30,700
- Signage: $15,000 – $25,000
- Initial Marketing Contribution: $5,200 – $10,000
- Insurance: $1,000 – $17,000
- Permits & licenses: $2,000 – $24,000
- Accounting & Legal Fees: $500 – $25,000
- Printing / Business Supplies: $300 – $1,000
- Uniforms: $1,400 – $3,300
- Training Expenses: $10,000 – $25,000
- Pre-Opening Payroll: $10,000 – $37,000
- Additional Funds – 3 Months: $1,000 – $96,000
- Total Estimated Investment: $369,800 – $744,200
Zaxby’s Net Worth Requirement
Maybe you can find the money to build a new Zaxby’s, but along with that Zaxby’s is also going to check out your net worth. The current net worth requirement to become a Zaxby’s franchisee is a liquidity requirement of $500,000 with net worth of $1,000,000.
At the end of 2018, Zaxby’s had 898 stores. The major percentage of these stores are franchised units (757), but there are many company-owned units as well (141)
The ongoing royalty fee paid to the franchisor is 6% of gross sales per week. This amount is remitted weekly by ACH draft on the Tuesday following each week (Monday through Sunday) for which the royalty was due.
Zaxby’s National Marketing Contribution
The ongoing national marketing contribution is 1% of Gross Sales per week (may be increased by up to 1.5% in the discretion of Zaxby’s) National Marketing contributions are paid at the same time as the royalty but are remitted to Zaxby’s National Marketing Fund.
Zaxby’s Local Co-op Marketing Contribution
The ongoing local co-op marketing contribution is between 1.5% to 3.5% of gross sales per week, and this amount is determined by the Co-op. Similar to royalties, this amount is remitted weekly based on the percentage of sales.
We don’t offer financial advice, so you should work with a financial adviser or accountant to determine a wise investment, but here are the parameters for how to view the investment.