It has never been cheaper to open a Papa John’s restaurant.
The company is going through a period of massive growth and plans to open roughly 200 restaurants annually for the next several years, according to a recent investor presentation.
Now Papa John’s is trying to recruit franchisees to open those restaurants, so it’s offering huge discounts to potential operators in the US.
The cost of franchising a Papa John’s restaurant is already relatively cheap, compared to other fast food restaurants like McDonald’s or Taco Bell.
The company says operators can open a unit with an investment of less than $US250,000. By comparison, McDonald’s requires at least $US955,000 in startup costs and Taco Bell requires a minimum investment of $US1.2 million.
But Papa John’s restaurants generate less revenue per unit than most top fast food brands.
The pizza restaurants generate an average of $US837,000 in sales per unit annually, according to QSR Magazine. The company ranks 40th for its sales per unit in the magazine’s list of the top 50 fast-food chains.
In order to open a Papa John’s restaurant, potential franchisees must have at least $US250,000 in net worth.
The company also charges a one-time franchise fee of $US25,000 for new restaurants.
Franchisees then have to pay the company two ongoing monthly fees — one royalty fee equal to 5% of net sales and a charge for advertising equal to 8% of net sales.
But as Papa John’s looks to grow in the US, it’s temporarily waiving some of those fees.
The company is waiving the $US25,000 fee for new domestic franchisees, providing them with a free set of ovens for every unit, and reducing the royalty fees for their first four years of operation.
For the first year, the fee is 1% of sales. Then the fee increases by one percentage point every year until it reaches 5%.
Papa John’s says the incentive package is worth roughly $US60,000.
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