February 20, 2023 | Last Updated on: February 21, 2023
If you are an entrepreneur and have been looking to start your own franchise, you might have looked for franchise opportunities in the quick service restaurant space. Undoubtedly, Popeyes Louisiana Kitchen is a popular fast food franchise in the space. It has become famous for its fried chicken, made up of classic Louisiana, Cajun, and Creole flavors.
The Popeyes Chicken franchise has grown to become an iconic chain in the United States. The success of their fast food restaurants has expanded to other countries too, including across North America. Indeed, Popeye was ranked #2 on Entrepreneur’s 2023 Franchise 500 List, moving up from spot #3, where they were ranked in 2022. The number of Popeyes franchise units has also grown by 21.6% over the last 3 years, an incredible amount of growth in just a short period of time. As such, it is clear that the demand for Popeyes franchises is high, and prospective small business owners are taking advantage of the opportunity at an incredibly high rate.
However, you might be concerned about the costs of the investment and the risk you will be taking on. Fear not, as you are in the right place. This post will inform you of how much it costs to start a Popeyes franchise, the franchise requirements, the advantages and disadvantages of a Popeyes, information on securing financing, and information on the profitability of a Popeyes franchise. We’ll cover the following subjects in detail in this article:
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If you have met the requirements and are convinced of the benefits of owning a Popeyes franchise, it is time to consider the cost of starting a location.
The first cost you will incur in order to have a franchise is the initial franchise fee. The initial franchise fee is part of your initial investment into starting the franchise. It is an upfront lump sum payment you make to Popeyes corporate upon signing the franchise agreement. The initial franchise fee that Popeyes charges is $50,000. $50,000 is not a small amount of money.
Comparing the initial franchise fee with other types of restaurant franchises, $50,000 is a bit expensive. However, the cost to set up a Popeyes location will be pretty large relative to the franchise fee, so this might make a bit of sense. In addition, Popeyes’s initial franchise fee might not be that far off from the industry standard for fried chicken franchise fees. Kentucky Fried Chicken (KFC), for example, has an initial franchise fee of $45,000. Burger King (though not a fried chicken franchise) has an equivalent franchise fee of $50,000. As a result, you should not read too much into the franchise fee, as it’s not too far out of the ordinary relative to industry standards.
While you pay the initial franchise fee to the national company upon signing for a franchise location, there are also costs that you will pay called ongoing fees. These ongoing fees will affect you in the first few months of operation as well as into the future. There are two ongoing fees that you will be obligated to pay to corporate Popeyes. These include a royalty fee and an advertising fee. The royalty fee is something that is charged every month, usually off of gross sales, as a fee taken for the continued cooperation and licensing of the Popeyes brand. The advertising fee is used to continue advertising at a national and local level to promote the success of your Popeyes franchise.
For Popeyes, the royalty fee is 5%, and the advertising fee is 4%. Compared to industry standards in restaurant franchising, this is somewhat normal. In any case, you should factor these costs into your business structure. You will want to be sure that you can still turn a profit after the fees you are aware that you will have to pay. If so, a Popeyes franchise might still be a good choice for you.
Moving away from corporate fees, there is also the overall investment that comes into opening a Popeyes franchise. You will need real estate for your franchise as well as inventory, equipment, and money for wages to start. This is part of your total investment, which can be quite substantial at the beginning.
Since there are different types of Popeyes locations, as well as different areas where they are located, it is impossible to say for certain what your cost will end up being. Yet, there are still some general estimates which might help you predict what your overall investment will end up being. Approximate estimates for an investment cost in a Popeyes location can range from $380,000 to upwards of $3,000,000.
As you can see, there is a wide range of total cost estimates for your Popeyes franchise location. To make your estimates more accurate, you should consider narrowing down your location and type of Popeyes store. This might help you get a better grasp on the costs of opening a location.
Even if you cannot afford the total investment cost right out of the gate, your dream of opening a Popeyes franchise is not yet over. There are still many options for you to fund a Popeyes franchise through financing, including the early stage of operations.
Summary of Popeyes Costs:
Franchise Fee: $50,000
Initial Investment: $380,000 to $3,000,000+
Net Worth Requirement: $1,000,000
Liquidity Requirement: $500,000
Royalty Fee: 5%
Ad Fee: 4%
Popeyes was founded in 1972 and quickly rose to popularity for the delicious flavors it offers to its customers. Based on a menu inspired by New Orleans, Louisiana, and Cajun and Creole heritages, Popeyes creates a unique business experience, incorporating these many regional flavors into its fried chicken. In 2017, Popeyes was acquired by Restaurant Brand International, the same company that owns Burger King and Tim Horton’s. They are currently the fifth-largest operator of fast food restaurants, behind only Starbucks, McDonald’s, Yum! Brands, and Subway.
However, Popeyes does not just offer fried chicken as a menu item. They have kept their flavor palate and diversified into offering spicy chicken, chicken tenders, and fried shrimp. While selling healthy food is certainly not their market, they have distinguished themselves by trying to represent the regional cuisine flavors of Louisiana.
The franchise business has led Popeyes to great success. Starting only in 1972, they have since opened 2,700 locations in North America. The Popeyes franchise has seemed to prove itself with its business plan and model time and again, making it an attractive franchise opportunity for prospective Popeyes franchisees. Popeyes is especially looking for franchisees in the United States and Canada.
One of the largest advantages of owning a Popeyes franchise is its sheer popularity with people. You will not need to go searching for customers. Many people are already well aware of Popeyes chicken and love the chance to eat at one of their restaurants. The restaurant franchise has seemingly proved its ability to operate profitably.
If this is your first franchise or your first Popeyes franchise, you are also in for good news. Should you experience a lot of success with your first franchise location, you can expand to other franchises in the future. While some franchises do not allow you to have multiple locations, Popeyes will allow you to purchase additional franchises in the future. This can increase your earnings as a franchise owner by obtaining multiple business licenses for your franchises and running them successfully. Put differently, starting your franchise business journey with Popeyes is a great start.
Another great advantage of owning a Popeyes franchise is that corporate Popeyes offers what is called a limited territory guarantee. This essentially means that you will not need to worry about competing with local Popeyes franchises. If you are approved, Popeyes corporate will not allow other franchisees to open up within a certain radius of your franchise. This can help you take care of some of the concerns with local competition.
This is an especially important advantage because not all franchisors will grant this to their franchisees. Since Popeyes offers this in their contracts, it is not just good news in the sense that you will not have to worry about as much competition with your franchise, but it also means that you can be confident in the nature of the franchise agreement. This Popeyes policy styles them as a franchisor who cares for their franchisees.
Another one of the advantages of franchising with Popeyes is the extensive training program that they will give you. From the ownership to the operations to the development of your franchise, Popeyes corporate is prepared to extend help. This increases your probability of success in your investment since corporate is willing to help you and they have a proven track record of doing well with their other Popeyes restaurants.
While there are many advantages associated with the Popeyes brand, there are some major drawbacks to franchising with Popeyes.
First, the cost of franchising with Popeyes is quite high. Their startup costs can be very expensive. In addition, you will have needed to accumulate a lot of liquid assets and net worth to be able to open up a location. The total investment in a location can be really large. Of course, this investment range will depend on the type and location of the Popeyes franchise being opened, but in any case, the Popeyes franchise cost is not small.
While franchising costs for a Popeyes franchise might be comparable to other fried chicken franchises, it is certainly more expensive than other restaurant franchises, such as Jersey Mike’s or Subway. In any case, you should be sure that this is an industry you want to commit to, as the upfront capital cost is quite expensive. In addition, you will need to be somewhat wealthy before you are even able to open a location. Attaining that level of liquid capital can be quite difficult.
While you do have an advantage of a limited territory guarantee from corporate, that limited territory guarantee is not necessarily the best guarantee in the industry. Corporate Popeyes can limit that guarantee to have a radius of essentially less than a mile. This means that a different Popeyes franchise may open in the future less than a mile from where you are. If this is the case, this could create stiff local competition with your Popeyes franchise.
That, of course, would cut into your profits and be difficult to compete against. This is one of the risks and disadvantages of opening a Popeyes franchise.
The downside of this franchise concerning competition does not just stop there. If you think about the wider fast food fried chicken industry, a Popeyes franchise can have a lot of competition. Chicken sandwiches, which are one of Popeyes’s products, are quite widespread. Burger King, Chick-Fil-A, KFC, McDonald’s, Wendy’s, and other fast food chains compete directly with Popeyes.
If you decide to open a Popeyes franchise, it will likely be best for you to choose a good location. An ideal location would certainly be away from other Popeyes locations but also far from similar fast food restaurants producing fried chicken.
While no investment is going to be completely free of competition, Popeyes does help distinguish itself through its Cajun, Creole, and Louisiana flavors. Its innovative menu has made it popular, and this may help counter some of the disadvantages of existing franchises.
So, you might have sorted through the advantages and disadvantages of opening a Popeyes and are considering opening a location. If you want to do so, there is still a set of requirements you will need to meet, aside from just the investment cost.
The requirements for opening a Popeyes franchise can be quite steep. Popeyes wants to make sure that you have the capital as a franchisee to be able to support the business and the necessary investments into the business.
The first of these requirements concerns net worth. If you want to open a Popeyes franchise, you are required to have a net worth of $1,000,000. This is a large amount of money, and it is certainly difficult for the average person to achieve. To check if you have enough of a net worth to be able to afford a Popeyes franchise, start by calculating the value of the assets that you own. This might be the value of your house, cars, property, stocks, and savings. Once you have combined the value of all of these assets, subtract your existing debt. Once you have this number, you can compare it with the net worth requirement. If you have a number greater than $1,000,000, you are still eligible to open a Popeyes franchise.
There is also a liquid capital requirement for opening a Popeyes franchise location. It is also, unfortunately, quite high. Popeyes requires prospective franchisees to have $500,000 in liquid capital. Liquid capital is cash or anything which can be converted to cash on short notice. You can calculate your liquid assets by starting with the amount of cash, savings, and stocks that you can cash out on short notice. Once you have this number, if it is greater than the $500,000 requirement, you are still eligible to apply for a Popeyes franchise.
Popeyes also shares some criteria for assessing your application which is not strictly financial. It is important that you meet both the financial and general requirements for your franchise application to be accepted by Popeyes corporate.
One of the general requirements for Popeyes to accept your application for a franchise is that you demonstrate a will to be involved in the business and take on an operational partnership. In other words, they want a franchisee who is ready and excited to get involved in opening up a Popeyes franchise.
While this requirement might be obvious, there are also other requirements that Popeyes has when it comes to the franchisee. The main and most difficult of these is previous experience.
When considering a Popeyes franchisee, Popeyes ideally wants to see someone with experience in managing a quick service restaurant in the fried chicken space. However, they may also want to see your previous business and managerial experience, especially if you do not have quick service restaurant experience in the chicken industry.
Overall, it seems that Popeyes corporate is very interested in having a selective process for their prospective franchisees. While this makes franchising with Popeyes somewhat difficult, it may also be beneficial for you. Their strict requirements may be a sign that Popeyes cares deeply about who they want to lead an operational partnership. That way, they might be able to share resources, expertise, training, and support with someone they are confident in achieving success.
If you are interested in financing, there are many options available to you. Sometimes affording additional inventory, equipment, real estate, or working through working capital needs warrants taking on debt. In any case, there are a variety of options available to you, including SBA loans, term loans, lines of credit, and equipment financing.
In the United States, there is a government department known as the United States Small Business Administration (SBA) which helps entrepreneurs looking for help in finding funding or financing for their business needs. Part of their help is a variety of loan programs made available to small businesses in the United States. If you are looking for a loan or are having trouble finding financing elsewhere, an SBA loan may be a great idea.
Some of the benefits of SBA loans are that the interest rates are generally pretty low and the terms of the loans can be quite favorable. One example of this is the SBA 7(a) loan, which helps small businesses with a host of expenses. These can include buying real estate, financing a large capital purchase, purchasing inventory, or helping stabilize working capital. The SBA also created a loan program geared towards franchisees that helps franchisees afford the upfront initial franchise fee that they have to pay, as well as the additional costs of franchising.
SBA loans can be a great option due to the beneficial terms they offer. For instance, the SBA 7(a) loan program prohibits lenders from penalizing prepayment. This allows businesses to get cheaper debt. Banks are okay with this as a result of the benefits they receive from the SBA as well. Namely, the SBA covers part of the loans with a guarantee so that banks experience less risk from lending to small businesses. This makes borrowing for small businesses more affordable.
Small business owners can find many materials and information on the SBA website which can guide them to better financial standing and success in their small businesses. Small business owners can access information on applying for SBA loans from their website.
It should also be said that SBA loans are not the most convenient option for small businesses, given the processing times and amount of paperwork involved in getting one. However, if businesses qualify, this type of debt can be cheap and beneficial. An SBA loan might help make the initial months of operation of your Popeyes franchise much cheaper and could be a good option to explore.
If an SBA loan is not for you, you might consider getting financing with a term loan. A term loan is an alternative financing option for your Popeyes franchise. Term loans can help by allowing a business to get access to a large amount of capital. This capital can be used to pay off the large expense of making a large capital purchase.
Terms loans are typically fixed-rate loans that can be acquired from banks or alternative lenders. Usually, banks will offer better terms for your term loan. This includes lower interest rates. However, applying for a term loan from a bank can be a lengthy process. You will likely have to submit financial statements, have a good credit score, and send other business-related documents that the bank requests.
If you want a term loan to reach your Popeyes franchise quicker, alternative lenders (like Biz2Credit!) can help. Alternative lenders generally entail a shorter process with less difficult qualifications for your business. However, the interest rates may be slightly higher to compensate the lender for the less diligence and greater risk they take on.
Term loans, while useful in different cases, are not something that you should take out intending to use over the long term. You do not want the high-interest rate of this loan to catch up with you and your Popeyes franchise and make owning the franchise more expensive than you originally thought. That is why it is best to use a term loan for short-term investments only.
A line of credit is a wholly different kind of loan. A line of credit is used to help improve cash flow and make working capital more efficient. A line of credit is essentially an amount of credit that a lender guarantees to you, and you draw down that line of credit when you need it. You pay interest on the money which you borrow and pay that money back over time.
A line of credit might be of interest to your Popeyes franchise location in its ability to help with unexpected short-term expenses. This might be the case if you have faulty equipment and need to replace it unexpectedly. The cost might be high and you may need a loan to help you cover your business to keep it operational. A line of credit is perfect in this case.
Both banks and alternative lenders issue lines of credit. Most of these types of loans are at a variable interest rate.
Equipment financing may be particularly relevant to your Popeyes franchise. Equipment financing is a form of financing where you purchase a piece of equipment for your business on a loan. This piece of equipment serves as the collateral for the loan. For Popeyes, you might use equipment financing for a deep fryer, for example.
Equipment can get expensive quickly. Therefore, it may be wise to start equipment financing. One of the advantages of doing so is the low-interest rate on your equipment. This is due to the high value of the collateral on the loan.
You should consider the best financing options for your unique situation as well as what you intend to purchase with your loan. The value of different interest rates and terms will heavily depend on the situation of your Popeyes franchise, its history, and its performance.
You might be ready to finance your Popeyes franchise or put up the funding to get your very own location. Before you do so, however, you will want to make sure you are going to have a profitable investment. The financials in the Popeyes FDD allow prospective franchisees to get a glimpse of what profitability looks like for a Popeyes franchise.
The results are, in fact, quite good. For the average Popeyes location, there is an EBITDA of just under approximately $400,000 a year. This is quite a sizeable amount of profit for a franchise restaurant. Indeed, it might be one of the largest pulls for opening up a Popeyes franchise.
Before you jump at the opportunity to start a Popeyes franchise, it is important to consider the level of return required to make up your investment. The exact profit you make from a location will vary too. Much will depend on your location, the success of your operations, your involvement, the quality of your management and employees, and the business’s overall performance. Put together, it is important to make specific calculations and be aware that average numbers may not end up being correct for the performance of your future Popeyes franchise.
Popeyes generated total systemwide sales of $5.5 billion for the fiscal year 2021. This total represents an increase of approximately 10% from the previous year and 25% from 2019. Another compelling statistic from the year is that the company’s same-store sales grew by 10.6%. Both domestic and international franchises continue to perform well, showing the strength of the brand on a worldwide scale. Much of the company’s growth has been driven by Popeyes’ chicken sandwich. The sandwich was first introduced in 2019 and took off in terms of popularity. It continues to be a driver of strong sales for the company and its franchisees.
Popeyes does not release individual franchise performance data to the public. However, it is reported that the average annual sales per Popeyes restaurant in the United States are roughly $1.9 million, and they have been growing strongly.
Popeyes continues to work hard at expanding its restaurant network. As of 2021, they have over 3,800 locations in more than 25 countries. The company is also very focused on international expansion, particularly in Asia. In the past few years, the company has been rapidly opening new locations in China and other countries. In 2021, the company announced plans to open more than 1,000 new restaurants in China over the next decade. Demand for and growth of new locations in the United States also remains strong as more and more franchisees take advantage of the company’s strong brand recognition and customer demand for its products.
Popeyes also showed a great deal of resilience and dedication to its franchisees during the COVID-19 pandemic. In 2020, Popeyes provided financial support to its franchisees to help them navigate the challenges posed by the pandemic, and they deferred royalty and advertising payments for some franchisees while also providing loans to help them maintain their businesses.
Recently, Popeyes has also been investing in digital technology and delivery services as part of a company-wide initiative to enhance customer experience and drive sales. When considering any potential franchise, prospective franchisees should always factor into their consideration process the recent development and expansion programs that the nationwide franchise is working on. It’s important to know that the national franchise is working hard to support its franchisees and that the monthly fees you will have to pay will go to more than just the national company’s bottom line.
All-in-all, Popeyes has been experiencing incredibly strong financial performance and growth in recent years. Though they have seen a bit of a dip recently, this is to be expected given the massive growth over the previous few years on account of their chicken sandwich. The brand continues to focus on successful new product launches and expansion into new markets. Their recent performance has proven that Popeyes has some of the strongest brand recognition in the nation, and their recent moves have shown an ability to adapt to changing consumer preferences and market conditions.
Opening a franchise isn’t easy, and it takes hard work and dedication. There are no guarantees, and success isn’t inevitable. But opening a franchise has many advantages, especially for new business owners who don’t have a lot of operational experience or don’t think they have what it takes to build a business and brand from scratch (it isn’t easy to do!).
Popeyes is definitely one of the leading fast food franchise brands right now, and they have an incredible track record of success and growth over the last few years. So, there is no doubt that a Popeyes franchise could be a real opportunity for a dedicated and prospective small business owner. As with any business, being diligent and doing your research beforehand is critical. Put in the hard work now to make sure there is actual demand in your community for a Popeyes franchise, that there are enough potential consumers to support one, and that your franchise will actually be able to compete effectively. Make sure to get outside opinions and perspectives.
So, get started now and begin researching! If everything lines up and you feel confident in moving forward, you may be on the verge of starting your very own successful long-term franchise business!
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March 20, 2023
