Explore the Costs of Running a Papa John Franchise

  • How to Open this Business: Guide
  • Startup Costs List
  • Pitch Deck Example
  • How To Increase Business Profitability?
  • How to Sale More?
  • How To Raise Capital: Guide
  • How to Value this Business?

Introduction

Papa John’s is one of the most popular pizza franchises in the United States and continues to expand its presence around the world. In franchising, operating costs are an important part of all pricing models and marketing strategies. Therefore, understanding how much it costs to open and operate a Papa John franchise is essential.

The restaurant industry is one of the most competitive in the world. According to the latest data, in the United States alone there are more than one million restaurants. In 2017, the restaurant industry reported nearly 2 billion in sales. This shows the growing demand for catering services. And with many different franchise opportunities, Papa John’s is an attractive option for potential franchisees.

If you are considering becoming a Papa John franchisee, it is important to have a clear understanding of the full range of potential operating costs associated with a Papa John franchise. This blog post will cover key expenses that all franchisees should consider before investing.

Operating Expenses

When considering the cost associated with opening and running a Papa John franchise, it is important to consider the multiple expenses involved. Depending on your location and franchise agreement, the following operating expenses may apply:

  • Rent or location rental
  • Royalty fee
  • advertising marketing
  • Inventory and supplies in store
  • Rental / purchase of equipment
  • Franchise and staff training
  • Public services
  • Professional services
  • Assurance

Rent or location rental

When considering opening a Papa John franchise, the rent or lease of the location is a major factor for a potential franchisee to consider. In the United States, rental or location rental costs between metropolitan and non-metropolitan areas vary widely. According to Statista, the average cost of renting or locating commercial property across the United States in 2019 was per square foot.

According to Numbeo, however, rent or rental locator fees for commercial properties in Los Angeles, New York and San Francisco averaged in December 2020 , 3 and 2 per square foot, respectively – significantly higher than the national average. In comparison, the estimated rent or rental of commercial property locator fees in Kansas City, MO; Des Moines, IA; And Madison, wi was , , and per square foot, respectively.

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Prospective franchisees should also consider that these costs can be affected by several factors, including the availability of a desirable location, length of lease, and neighborhood desirability. In any case, rent or location fee rental should not comprise 15-20% of the total cost of a franchise.

The franchise agreement states that Papa John’s will assist potential franchisees in their search for a suitable location, but that all rental or rental payments must be made by the franchisee.

Royalty fee

Papa John’s is one of the most popular pizza franchises in the United States. As such, there are various fees associated with becoming a Papa John franchisee. One such fee is the royalty rate, which is the fee a franchisee pays the franchisor in exchange for brand recognition and access to other features provided by the franchisor.

Papa John’s current royalty rate is 6% of total sales. This figure is based on the most recent statistics, which show that the average royalty rate for pizza franchises in the United States is 6.02%. This figure can vary depending on different factors, such as the size of the franchise and the territory in which it is located.

In addition to the royalty rate, there are also other costs associated with operating a Papa John franchise. These include costs such as marketing expenses, food and beverage expenses, staff training, equipment purchase and maintenance expenses, and legal and accounting fees. All of these costs will factor into the overall cost of operating a Papa John franchise, which is typically around 0,000 to 0,000 depending on individual factors.

Ultimately, Papa John franchisees should consider all costs associated with starting and operating a franchise before committing to a particular franchise opportunity. Royalty rate is an important factor to consider, as it can have a significant impact on the overall profitability of a franchise. Keeping these factors in mind can help franchisees make the best decision when it comes to selecting the right franchise opportunity.

advertising marketing

When it comes to running a Papa John franchise, advertising and marketing costs are a big factor. According to SEC filings, Papa John spent 3 million on advertising and sales promotion in 2019. That equates to 4.3% of the company’s total revenue. In the fourth quarter, Papa John specifically spent .9 million, or 7.4% of sales, on advertising and sales promotion.

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Advertising and marketing expenses for 2020 are expected to increase approximately 4% from the 2019 amount. This is primarily due to Papa John’s investing more in digital marketing strategies, such as search engine optimization , Google Adwords, banner ads and social media campaigns.

Papa John’s also invests in traditional forms of advertising, such as television, radio and outdoor advertising. Additionally, Papa John’s regularly runs promotions and coupons, which require additional advertising dollars. Promotions such as pizza or free pizza discounts help drive traffic and build the brand.

All of this suggests that Papa John franchisees should plan to invest in both traditional and digital campaigns and advertising. It is important to ensure that their advertising and marketing campaigns are focused on reaching the right customer segments and are profitable. This is essential to ensure that the franchisee is able to maximize their return on investment and ensure the success of their business.

Inventory and supplies in store

One of the key components of a Papa John franchise operation is inventory and in-store supplies. This includes a variety of items such as pizza ingredients and toppings, beverage supplies, cups, lids and straws, plates, napkins, cleaning supplies, and more. The cost of these items will vary depending on the size of the franchise, its location and the product type of Papa John’s restaurant. Franchises located in larger urban markets may pay more for supplies due to higher demand for merchandise.

According to the most recent report from the International Franchise Association, the median annual cost for inventory and supplies for a Papa John franchise in the United States was ,000 in 2019. This estimate is based on data from over of 275 franchises located across the United States and is an estimate of the average cost per unit based on franchise size and location. By comparison, median inventory and supply costs for Metro franchises in 2019 were ,000 per unit while median costs for Domino’s pizza franchises were ,000.

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On average, the cost of supplies for a Papa John franchise will include items such as pizza ingredients and toppings, dough, drinks, cups, lids and straws, plates, napkins, and cleaning supplies. . Exact inventory and supply costs will vary from franchise to franchise, but generally should include the following:

  • Pizza ingredients and toppings (e.g. cheese, pepperoni, mushrooms, etc.): -8 per unit at a large city market
  • Dough and Beverage Supplies: .75 to .00 per unit
  • Cups, lids and straws: .25-0.50 per unit
  • Plates and napkins: .00 to .00 per unit
  • Cleaning products: -3 per unit

When calculating the cost of inventory and supplies for a Papa John franchise, it is important to consider the size and location of the unit as well as the type of product served. In larger urban markets, the cost of supplies may be higher due to the higher demand for goods. Also, the cost of supplies will depend on the particular items purchased (eg fresh vegetables, cheese vs frozen toppings, etc.). Overhead costs for inventory management, such as temperature control and storage, should also be considered as part of an overall estimate.

Rental / purchase of equipment

In order to open a franchise at Papa John’s, one must be prepared to invest a considerable amount of money in the purchase or rental of the necessary equipment. The cost of renting the equipment needed to open and operate a franchise can vary, but has been estimated at ,000 to ,000. This cost will depend on the equipment rental option selected as well as the location of the franchise. Additionally, purchases of new equipment for an existing franchise may also be required for upgrades or dining out.

In addition to leasing and/or purchasing equipment, additional start-up costs may also be incurred, such as franchisee fees, rent/mortgage payments, insurance, and signage. Additionally, Papa John generally encourages franchisees to hire outside contractors to assist with building renovations, therefore, associated costs must also be considered.

When considering renting or buying the necessary equipment, it’s important to decide which option makes the most financial sense for your franchise. Leasing can provide many benefits to franchisees, such as non-payment and lower payments with the ability to return it at the end of the lease. On the other hand, franchisees may find that purchasing the equipment can save them money in the long run. In either case, it is important to consult with an experienced franchise attorney to understand the different lease and purchase options available.

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It is also beneficial to compare costs between providers, as the cost of purchasing or renting equipment can vary depending on the provider. Additionally, franchisees should seek out available government-backed loan programs, such as the Small Business Administration (SBA) loan, to fund their franchise development. Finally, Papa John’s offers their own financing program to reduce the acquisition costs associated with opening a franchise.

Franchise and staff training

It is estimated that starting and running a Papa John franchise costs anywhere from 5,000 to 5,000. This includes initial franchise fees of up to ,000 as well as ongoing franchise fees of up to 5% of sales for each month. Initial start-up costs include real estate, construction and repair, equipment, signage, inventory, grand opening promotions and advertising.

In addition to start-up costs, owners and staff must be trained to start the business. Franchise and staff training is critical to success. Most franchisees opt for at least two weeks of restaurant training, which usually costs between ,000 to ,000 . Training can even go up to ,000 for those who need advanced management training.

Other significant costs for franchisees include on-site food and beverage supplies, insurance, payroll and labor, restaurant expenses, and local advertising. Many franchisees also allocate money for personal expenses, such as rent and utilities, while actively involved in the day-to-day operations of a franchise.

Public services

Utilities are a necessary expense for any business, especially a restaurant. Papa John franchise owners must include the cost of utilities in their operating budgets. The latest statistics show that electricity, natural gas and water are the three largest utility expenses for restaurants. The National Restaurant Association reports that electricity accounts for 48% of all utility costs, natural gas 34%, and water 18% on average for restaurants in the United States.

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Electricity is the most obvious utility cost and can vary greatly depending on a few factors, such as government and economic conditions. In 2019, the US Energy Information Administration estimated the cost of electricity for restaurants to be between 8.5 and 11.5 cents per kWh. The price of electricity can also be affected by the size and location of the restaurant, as well as the efficiency of their appliances and lighting.

Natural gas is generally used to heat the interior of the restaurant and for cooking. The price of natural gas varies from year to year but is generally much lower than the price of electricity. In 2018, restaurant natural gas was about 3.4 cents per therm. The cost of natural gas can be reduced with energy efficient cooking equipment and utensils.

Water Bills for restaurants can vary for several reasons. Some restaurants may be charged a flat fee, while others may be charged based on usage. The cost may also be influenced by local and state regulations. Depending on these factors, water bills for restaurants can range from a few cents per gallon to over 10 gallons per billing cycle.

It is important for Papa John franchise owners to include the cost of utilities in their operating budget and monitor their usage to ensure they stay within their budget. Utilities can often be a major expense, but there are ways to save, like investing in energy-efficient appliances, lighting, and cooking utensils.

Professional services

When estimating the costs of operating a Papa John franchise, it is important to consider a budget for professional services. Professional services include legal, accounting and marketing fees necessary for the operations of any business. The exact cost of professional services varies, depending on the size and scope of the business.

The average cost of professional services for a single-location Papa John franchise is between ,000 and ,000. This includes fees for legal fees (including trademark fees), accounting, financial planning and marketing fees. For a multi-location franchise, the cost can be considerably higher – between ,000 and ,000 . These costs can be spread over several years to make the financial burden more manageable.

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It’s always a good idea to consult with a qualified accountant to determine your exact professional service expenses. An accountant can help you determine the budget amount for services, while helping to keep your paperwork in order.

Assurance

When you own a Papa John franchise, insurance coverage is a must. The types of insurance you will need for franchise property include liability insurance, property insurance, workers’ compensation insurance, and commercial auto insurance.

Liability Insurance: This is a must for any Papa John business owner and franchisee. Liability insurance covers all claims for property damage or bodily injury to your business. According to the most recent statistics available from the Insurance Information Institute, the average business cost for liability insurance premiums is approximately 3 per month.

Home insurance: Property insurance covers theft or damage to any property you own that is related to the business. Statistically, home insurance has cost many businesses around per month.

Workers’ Compensation Insurance: It is required in some states, depending on the size of the deductible, to carry workers’ compensation insurance, which protects the health and safety of your employees if they are injured on the job. The average cost for businesses is usually around per month.

Commercial auto insurance: If you plan to use vehicles with the business, commercial auto insurance coverage is a must. By the latest industry standards, commercial auto insurance premiums cost around per month.

Conclusion

Becoming a Papa John franchisee is a great business opportunity. But as with any corporate venture, potential franchisees need to understand all of the costs associated with their operations. This blog post has outlined some of the most common operating costs associated with Papa John franchises, including location rent or lease, royalties, advertising/marketing, in-store inventory and supplies, lease/ equipment purchase, franchise and staff training, utilities, professional services and insurance.

By being aware of all associated costs, potential franchisees can better budget for their Papa John franchise. Many of these costs can vary depending on the complexity of the particular franchise. But overall, these operating costs are manageable and usually worth the created brand presence, customer loyalty, and opportunities for significant financial success.