February 16, 2023 | Last Updated on: February 21, 2023
Little Caesars is a well-known fast and convenient pizza food chain. Their franchise model has allowed them to spread far and wide across 25 countries and more than 5,000 locations. Their cheap setup model and famous pizza have allowed them to gain a great reputation in the franchise community. If you are considering starting a Little Caesars franchise, you have come to the right place.
You might love Little Caesars pizza, but you might be a little bit concerned about the cost that comes along with starting a Little Caesars franchise. You might also be interested in the profitability of owning a location and whether you qualify for an application to start one of the pizza franchises.
You are in the right place. This article will review everything you need to know about the Little Caesars brand, its franchise opportunities, the franchise cost, the returns, financing a Little Caesars restaurant, and the potential profits of a Little Caesars franchise location. We’ll cover the following in detail in this article:
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Little Caesars was founded in 1959 in Detroit, Michigan, with the first franchise location opening soon thereafter. The phrase “Pizza! Pizza!” came to be associated with the brand at the time for offering two pizzas essentially at the price of one.
As the restaurant franchise expanded to grow, and close to the turn of the century, Little Caesars pivoted and began promoting hot-n-ready pizza. The quick-service restaurant now focuses more on providing hot, cheap pizza to go.
Franchising of a Little Caesars location began in the 1960s, and by 1987, there was a Little Caesars enterprise in all 50 states. The brand has since expanded to become the world’s third-largest pizza chain. There are now over 5,000 franchise units around the world, spread across more than 25 countries.
In any case, Little Caesars is a popular fast food pizza chain. There is a ton of opportunity for franchise businesses. The carryout model has become popular in America, especially as many people are busy and cannot afford to spend much time cooking or eating out.
Little Caesars faces competition from pizza restaurants like Domino’s Pizza, Pizza Hut, and more. Its focus on cheap and ready pizza has kept it doing well in the pizza business. Establishing a new franchise should be relatively cheap and easy if you are considering becoming a Little Caesars franchise owner.
Before you start your own Little Caesars franchise, it would benefit you to consider the advantages of opening up your own Little Caesar enterprise.
One of the first advantages of owning a Little Caesars is the ease of setup and operation. Since Little Caesars has been in the business for decades now, they have a lot of experience, staff, resources, and training on hand. The business model has been proven time and again. Franchise development should be easy since the corporate office has opened Little Caesars over 5,000 times.
Another advantage of owning a Little Caesars is that corporate is incentivized to continuously help their franchisees. Since over 90% of Little Caesars franchises are owned by franchisees, you can be confident that you will have an appropriate agreement with corporate. Little Caesars will want your franchise to succeed so that it can continue to expand.
A third advantage of opening up a Little Caesars is the cost. The fees paid to the corporate branch of Little Caesars are small compared to other brands. It is relatively cheap to open too. Little Caesars has discovery days where you can see if you qualify for additional programs they have in order to make opening a Little Caesars franchise cheaper.
Little Caesars is also a flexible business, with both pick-up and drive-thru options. It has been able to establish itself as a go-to place for quick carryout pizza. The business has survived a lot of economic downturns, including many recessions and the COVID-19 pandemic. It seems that the Little Caesars business model is well suited for many conditions. In any case, the brand has proven itself time and again. Opening a branch of Little Caesars might be a great safe investment.
While the advantages of owning a Little Caesars franchise are plentiful, there are also several drawbacks in deciding to franchise with Little Caesars.
The first of these disadvantages is the fees. While there are many ways to try to get your fees lowered for opening a Little Caesars, you will still have to run your business effectively to turn a profit. From employees to equipment to other various expenses, you will still need to be sure that your business can turn a profit after all of your required fees.
One of the other disadvantages to owning a Little Caesars is the sheer scale of the competition. The fast food pizza industry has many players. Domino’s and Pizza Hut are just some examples. There are also Papa John’s, as well as any local restaurant trying to compete with you. Your product is really only distinguished by the Little Caesars brand.
Little Caesars tries to get around this by offering pizza faster than their peers and for low prices. They still make their dough fresh and in-house, so there are some appealing aspects to the kitchen of Little Caesars. Yet, it does not wipe out the sheer amount of competition that your prospective Little Caesars will be facing in the market.
The competition will come not just from other pizza chain locations or local pizza joints but also from other Little Caesars. Although more than 5,000 locations of Little Caesars is an impressive number showing the popularity and attractiveness of the Little Caesars brand, it is also an indicator that Little Caesars may be competing with itself.
This is why choosing a location for your Little Caesars franchise will be really important. Ideally, you will select a location without competition from other pizza places, as well as far away from other Little Caesars locations. Since franchisors are sometimes not clear about making your franchise far enough away from one of the same franchises, it is important to do your research on your intended location. Generally, this is because the franchisor and franchisee incentives do not always align.
If you are interested in moving forward with opening a Little Caesars franchise, you will need to know their franchising requirements. The corporate franchisor of Little Caesars will require you to have a minimum net worth and amount of liquid capital in order to qualify as one of their franchisees. It is important to understand this before you move forward in the application process so that you have the highest chance of approval and do not waste your time.
The good news about Little Caesars’ corporate requirements for franchising is that they are really friendly to people who want to start a franchise. In doing so, they try to make their requirements easy to attain.
To start with, opening a Little Caesars franchise means that you need to have a minimum net worth of $350,000. This might sound like a lot, but by the time you factor in all of your assets, it might not be that much. You might have a house, car, and savings to combine. By the time you combine these assets, the total value of all of them might be $350,000. You will need to add the value of your assets and subtract the outstanding debt on the assets. Combined, you should have at least $350,000 in net worth.
This is not the only financial requirement Little Caesars puts on its franchisees. You also need to have a certain amount of liquid assets. Liquid assets are defined as cash or anything that can be quickly converted to cash, such as stocks. The liquid asset requirement for Little Caesars is $150,000. So, if your combined savings accounts and other stock accounts in your name total $150,000, which you can access on short notice, then you can meet this requirement as well.
There is one great offer Little Caesars makes to prospective franchisees who are worried about meeting the financial requirements. If you have a business partner whom you intend to work with, you can combine both of your net worth totals and liquid asset totals to meet the financial requirements laid out by Little Caesars. This can make things substantially easier for you if you do not have that many financial assets. The only catch to this is being able to find and trust a business partner with whom to start the process of franchising a Little Caesars.
If you have met the requirements, you might be interested in the actual costs of starting a Little Caesars franchise. There are many categories of costs, so it is best to start with the ones which you will pay to corporate.
The first cost you will need to pay is the initial franchise fee to Little Caesars. The initial franchise fee is the cost you pay at the signing of the franchise agreement with the franchisor. It is an upfront, lump sum payment to the franchisor from the franchisee. In the case of Little Caesars, the initial franchise fee is only $20,000. This is a very low franchise fee compared to market standards. This makes Little Caesars an appealing chain to franchise with since they strive to be affordable for entrepreneurs looking to open up a Little Caesars franchise location.
The next fee you will pay to corporate is a royalty fee. While this fee is not assessed at the start of your business, it is something you will pay every month of the business’s operation. That is why it is important to consider the expected burden upfront, as these fees can add up over time. Unfortunately, for prospective Little Caesars franchisees, the royalty fee is somewhat high, at a rate of 6% of gross sales.
To understand what this means, let us review gross sales. When your Little Caesars franchise starts selling pizza, you will have to calculate the costs which go directly into making the pizza. This is defined as the cost of goods sold. All of the money your business takes in is called revenue or net sales. Take revenue, subtract the cost of goods sold, and then you are left with gross sales. You will owe 6% of the gross sales amount to Little Caesars as a royalty fee.
There is also an advertising fee for Little Caesars. The advertising fee is also high, at 7% of gross sales. This is higher than many other franchise businesses; however, the advertising fee is used to help market Little Caesars at the national level as well as in your local community. So, there might be some of these fees which end up being helpful to your franchise location.
By the time you get to the grand opening, your initial investment will be a lot larger than $20,000. When all costs are put together, you can expect to spend anywhere from approximately $360,000 to well over $1,500,000. This is because to pursue the Little Caesars franchise opportunity, you will have to invest not only in the corporate fees but also in real estate, equipment, inventory, insurance, initial wages, training programs, utility expenses, and more.
The large overall investment into starting your Little Caesars franchise is one of the top reasons to check and see where you can save money.
You may have sticker shock from the prices seen in what it costs to start a Little Caesars franchise, but do not worry, as there are still options to make this franchise possible. It is also important to note that many franchises will be expensive and have high upfront costs, especially if your startup franchise is in the quick-service restaurant business.
One of the ways you can make this total investment more affordable is through financing. This can reduce the burden of an upfront capital-intensive spend on your franchise. As a prospective business owner, there are many options made available to you to help you achieve your business goals, such as through SBA loans, term loans, lines of credit, and equipment financing. This can make both the start and the continued operation of your franchise more affordable.
The United States Small Business Administration (SBA) looks after entrepreneurs who are looking to start and operate their own small businesses. If you are having trouble finding financing with other options, turning to the SBA may be a great idea. The SBA offers a loan program in conjunction with lenders with good protections and reasonable interest rates for borrowers.
One particularly good program is an SBA 7(a) loan, which can help with expenses that businesses are experiencing. It can help with working capital, acquiring real estate, or buying equipment and inventory that a business needs.
The SBA also offers loans geared towards franchisees that help them afford the initial franchise fee and other related franchising costs.
The SBA loan programs often come along with comparably favorable interest rates and requirements on the loan. For example, in the SBA 7(a) loan program, prepayment is not penalized. This is because the SBA has funding to cover a portion of the loans that SBA lenders decide to lend out. This makes the loans less risky for banks and, in turn, causes banks to offer people lower interest rates.
The SBA provides small business owners with many materials and options for small businesses to improve their standing. This includes further information about loan options and application information. While SBA loans are not the most convenient option for small businesses, they do provide a low-interest rate loan option if small businesses can qualify.
In any case, SBA loans can help make the initial operating phase of a Little Caesars franchise much less expensive in the sense that a business owner does not have to fund everything up front. You might be able to use these loans to help facilitate additional capital your business needs to expand as you begin.
Term loans can provide your Little Caesars franchise with another financing option, especially if an SBA loan will not work for your business. Term loans are a loan that helps businesses by infusing a large amount of cash. Over time, the business will repay the loan, usually set at a fixed rate. Both banks and alternative lenders can issue these types of loans, so there is some flexibility in seeing whom you prefer to get your additional funds from.
It should be noted that the process for obtaining a term loan can be somewhat cumbersome, especially when you apply for them from banks. This is due to the large number of qualifications that are required and the length of the application process.
Going the bank route with a term loan is usually the best option. This is because banks tend to offer lower interest rates. The process for getting a term loan from a bank can be tricky, however. You will need to have a good credit score history, business plan, financial statements, and other required documents for approval. The processing times on these loans can vary as banks will try to spend more time evaluating the risk of your loan.
If you are looking to infuse cash into your Little Caesars franchise quicker, using an alternative lender (like Biz2Credit!) is a great option. The application process is generally much shorter, and you can get approval for funding for your business opportunity quickly. The qualifications for a loan are also less stringent. However, the interest rates with alternative lenders will usually be higher to compensate the lenders for the additional risk.
You should be cautious about how you use a term loan. Term loans are great for when you need to make a large capital purchase or pay off a large expense. Yet, the short duration of the loan and the high-interest rate that comes alongside it may quickly make the term loan more expensive than you originally intended. That is why, if you are planning on using a term loan to help finance your Little Caesars franchise or operations, you should be trying to use this type of loan only with short-term investments.
If you are still looking for a different kind of financing to help you start or operate your Little Caesars franchise, a line of credit might be what you are looking for. A line of credit is a type of loan that provides businesses with a certain amount of credit. A business is allowed to draw down that credit whenever they wish to use it. They then pay interest on the borrowed money and pay it back over time.
For your Little Caesars franchise, you might have some short-term expenses which are quite high. They may pop up as you continue operating, and it may not be efficient to keep a lot of cash in the business. In this case, having a line of credit can help. Especially if you run into unexpected costs, such as the need to replace equipment or inventory, a line of credit might be what you need.
A line of credit can be issued by either a bank or an alternative lender. The standard for lines of credit is variable interest rates. As a result, your borrowing might be more or less expensive in the future based on market conditions.
In general, having access to a line of credit can help your Little Caesars franchise maintain a good position concerning its cash flow and avoid the unnecessary hassle involved in transferring money into the business for short-term expenses.
Equipment financing is one of the most relevant forms of financing available to you if you start a Little Caesars franchise. Equipment financing is a loan used for purchasing equipment, as its name implies. For your Little Caesar’s location, this might be pizza ovens, for example. Or, you might need to purchase cash registers or refrigerators.
In any case, this equipment can get really expensive quickly. To make things easier on you and your new small business, you can take out an equipment financing loan to get a low-interest rate loan on the equipment you need for your kitchen and storefront.
Since the loan is being used to purchase equipment, the equipment will serve as collateral in this type of loan. This means that your interest rate is lower, as the lender can be relatively sure of the stability of your business.
Equipment financing also entails several options. One of these options is called lease financing. In lease financing, you can lease equipment for a specified period and pay for that lease every month. Once the lease period is up, you can continue leasing, return the equipment, or purchase the equipment at that point. This reduces the upfront cost to a business needing the equipment.
There is also an option called a capital lease. This is like a loan, where you lease the equipment for a period of time. The difference between a capital lease versus lease financing is that at the end of the capital lease, you own the equipment.
The other form of equipment financing is an operating lease, where you pay for the use of a piece of equipment and will return the equipment at the end of the lease period.
For your Little Caesars franchise, it is best to consider the financing options that best suit your business. The varied terms and interest rates require you to consider your unique financial needs and situation before proceeding with acquiring financing.
Perhaps the ultimate question is how profitable a Little Caesar’s franchise is. Your individual situation will ultimately determine how profitable your location is. This includes your location, the type of Little Caesar’s store you have, your employees, how well you manage your location, economic conditions, and the overall success of your business. Some estimates put the range of profit that franchisees take home at the end of the day to be between $50,000 to $200,000 per location.
It is important for you to get a good idea of what your costs look like. This means examining any forms of financing which you elect to use. Projecting out your revenue and costs ahead of time may help you assess whether your Little Caesars franchise will be able to be as profitable of an investment as you are looking to achieve.
Little Caesars was founded in 1959 by Mike and Marian Ilitch. The first Little Caesars location was opened in Garden City, Michigan. The chain quickly became known for its innovative approach to pizza delivery and customer service.
In the 1980s, Little Caesars introduced its famous “Hot-N-Ready” concept, which they still offer today. With this approach, customers were able to walk in and pick up a large, ready-to-eat pizza without having to call ahead or wait for it to be made. This was unique to Little Caesars, and the business model proved to be a huge success. Through this, Little Caesars was able to position itself as a leader in the fast food pizza industry.
In the 1990s and 2000s, Little Caesars continued to grow and expand, both domestically and internationally. As part of this expansion, the chain began expanding its menu, adding new products such as breadsticks, wings, and salads. Many of these additional menu items are still offered today.
Despite some challenges between 2016 and 2019, Little Caesars has experienced financial success in recent years. The company continues to maintain its position as one of the largest pizza chains in the United States and the world. Currently, Little Caesars is the third-largest pizza chain in the United States in terms of footprint and has locations in all 50 states. Little Caesars ended 2021 with 4,181 stores. However, they lost a net of 81 stores over the preceding three years. They are currently working on plans to turn this trend around. Sales, on the other hand, took off between 2020 and 2021, rising from $3.95 billion to $4.23 billion, the largest jump in over five years.
One of the key factors in Little Caesars’ recent financial success has been their focus on value and affordability. The company’s “Hot-N-Ready” concept continues to be a hit with customers and a strong selling point for the franchises.
Additionally, in 2020, Little Caesars saw a surge in demand for delivery and takeout services due to the COVID-19 pandemic. This boost in sales has helped to offset some of the financial challenges faced by the company. The national franchisor has also invested heavily in digital technology in recent years, making it easier for customers to order pizza and receive deliveries than ever before.
Opening a new franchise is never a cheap process. National franchisors know the value of their brands, and they charge franchisees accordingly. However, that doesn’t mean it cannot be a worthwhile and lucrative decision under the right conditions. Little Caesars has long been a national brand that is recognizable across the entire United States – not just in certain regions.
In starting a Little Caesars you are tapping into a national brand that is widely known with a strong customer base. Plus, you will be working with a national franchisor that knows what it takes to run a successful storefront, relieving you of many burdens, such as having to develop products and an operational plan from scratch.
At the same time, there are no guarantees in any business endeavor, and Little Caesars franchises are not guaranteed success. So, as with anything, the key is to do your research and due diligence. Is there a need for Little Caesars or a fast pizza shop in your community? What is the market like? Are there a lot of competitors? Do locals tend to eat frequently at pizza shops? You should be attempting to answer these questions before you decide to open up your own franchise. Having the answers before you open will help you avoid any disastrous decisions, such as opening a franchise in a location where it is guaranteed to fail. So, be diligent and do your research. Putting in the hard work upfront can save you from serious headaches down the road. If everything checks out, then you could be well on your way to having a successful franchise in the near future!
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March 20, 2023
