How to Buy a Pizza Franchise: A Guide for Aspiring Entrepreneurs
Pizza is one of the most popular and profitable food businesses in the world. According to CHD Expert, Americans spend $46 billion a year on pizza, and PMQ Pizza Magazine expects that number to hit $50.7 billion by 2023. If you are looking for a slice of this lucrative market, buying a pizza franchise might be a smart option for you.
A pizza franchise is a business model where you pay a fee and royalties to use an established brand name, recipes, systems, and support. You get to benefit from the brand recognition, customer loyalty, marketing, and training that the franchisor provides. You also get to operate under a proven business model that has been tested and refined over time.
However, buying a pizza franchise is not as easy as it sounds. There are many factors to consider before you invest your time and money into this venture. Here are some steps to help you buy a pizza franchise successfully:
- Do your research. There are hundreds of pizza franchises to choose from, each with its own unique selling proposition, culture, requirements, and costs. You need to do your homework and compare different options to find the one that suits your goals, budget, and market. Some of the most popular pizza franchises in the US include Domino’s Pizza, Pizza Hut, Marco’s Pizza, Blaze Pizza, and Jet’s Pizza. You can visit their websites or contact their franchise development teams to learn more about their franchise opportunities.
- Review the Franchise Disclosure Document (FDD). The FDD is a legal document that every franchisor must provide to prospective franchisees. It contains detailed information about the franchisor’s history, financial performance, fees, obligations, litigation, trademarks, territory, training, support, and more. You should review the FDD carefully and consult with a lawyer or an accountant if you have any questions or concerns.
- Evaluate the costs and returns. Buying a pizza franchise can be a significant financial investment. You need to consider the initial franchise fee, which ranges from $15,000 to $30,000 depending on the brand. You also need to factor in the ongoing royalty fee, which is usually a percentage of your gross sales (typically 5% to 6%). Additionally, you need to pay for the equipment, inventory, lease, insurance, labor, utilities, marketing, and other expenses associated with running a pizza business. The total initial investment can vary from $119,700 to $2,109,450 depending on the brand and location. On the other hand, you also need to estimate the potential revenue and profit of your pizza franchise. You can look at the average unit volume (AUV) or sales per store of different brands to get an idea of how much money you can make. For example, Blaze Pizza reported an AUV of $1,198,201 for the top 50% of its franchised stores in 2021. However, keep in mind that these figures are not guarantees and may vary depending on various factors such as location, competition, management, and market conditions.
- Secure financing. Unless you have enough cash on hand to buy a pizza franchise outright, you will need to secure financing from a bank or other sources. Many franchisors offer financing assistance or have preferred lenders that can help you obtain loans with favorable terms. You can also explore other options such as Small Business Administration (SBA) loans, home equity loans, retirement funds rollovers, or crowdfunding platforms.
- Sign the franchise agreement. Once you have completed all the previous steps and received approval from the franchisor, you will need to sign the franchise agreement. This is a binding contract that outlines your rights and responsibilities as a franchisee. You should read it carefully and understand all the terms and conditions before signing it. You should also keep a copy of it for your records.
- Prepare for opening. After signing the franchise agreement, you will need to prepare for opening your pizza franchise. This may involve finding and leasing a suitable location, hiring and training staff,