What is the Cost to Buy a Whataburger Franchise?
March 4, 2023 | Last Updated on: March 21, 2023
March 4, 2023 | Last Updated on: March 21, 2023
Whataburger is a famous hamburger fast food chain in the United States. So many people wish that they could bring Whataburger to their state. Since its inception in Texas, Whataburger has grown to massive regional popularity. Its delicious burgers, fries, fried chicken, chicken sandwiches, and milkshakes have established the brand as a popular spot. The locations operate 24-7, making Whataburger a great late-night place for people to get food and relax.
You may be considering starting your own business. This might be especially true if you have been saving for a while and intend on investing to start your own business. You may have been reviewing the various business opportunities available to you as an entrepreneur. As you might know, choosing the right opportunity can be hard. This is especially true when considering how to turn a profit. If this is your first business, you might be interested in getting help and not just running one alone.
As a result, you might be interested in pursuing a franchising model when starting your business. The appeals of a successful business model, support network, and other benefits offered by franchising may lead you to be interested in becoming a franchisee. While you explore franchising options, you may be interested in affordable franchise options that suit your budget. This might include concerns about the costs you pay to the franchisor as well as costs contributing to your total investment. You may be exploring cheap franchises to start, as well as those that you can finance. In doing so, you may have come across Whataburger and are contemplating if Whataburger is the right franchise choice for you.
You are in the right place for all of your questions and information needs about franchising with Whataburger. This post will review the Whataburger franchise, the pros and cons of franchising with Whataburger, their requirements to franchise, the Whataburger franchise cost, the profitability of a location, and the application process.
As a prospective franchisee, it is a good idea to become familiar with the Whataburger brand. Whataburger was founded by Harmon Dobson and Paul Burton in the city of Corpus Christi, Texas, in 1950. The first Whataburger location is located there. The burger chain was founded in order to provide a delicious burger that required two hands to hold. As the name suggests, the founders wanted someone who ate the burger to remark, “What a burger!”
Since its founding, the brand has expanded to over 900 locations. There are over 670 Whataburger locations in Texas, popular in cities like San Antonio, Austin, Odessa, and more. Whataburger’s home state is Texas, but the brand is growing with an additional 150 Whataburger restaurants in other states, such as Arizona, Alabama, Oklahoma, Arkansas, Florida, Georgia, Louisiana, Mississippi, and New Mexico.
The restaurant franchise used to be family-owned until 2019 when a majority stake of the company was sold to private equity firm BDT Capital. The resounding popularity of the Whataburger brand has allowed them to sell their products in grocery stores and attract the demand of prospective franchisees. It would be no stretch of the imagination to say that Whataburger’s business model and products are extremely successful.
If you meet the requirements of being a Whataburger franchisee, it is time to start considering if you want to make the financial commitment to being a Whataburger franchisee. This analysis should concern both a careful consideration of the costs of a Whataburger as well as the profitability of a Whataburger.
Starting with the costs, there are two main costs that you will need to pay to get a Whataburger location off the ground. These include costs paid to the franchisor and costs paid in general to be able to fund the construction and operation of the business. The overall cost of buying a Whataburger franchise is reflected both in the startup cost or initial investment as well as the ongoing fees that you will have to pay to start in the first few months of the operation of your franchise.
Unfortunately, estimating the costs for a Whataburger can be quite difficult. This is because Whataburger does not have that many franchises, and the franchises it does have are likely owned by people with a lot of capital. Whataburger does not publish its costs, so it is difficult to get a good estimate of what the costs will be for a prospective franchisee. The best source for any costs, of course, is the Franchise Disclosure Document (FDD) that a franchisor will issue to a franchisee during the franchisee application process.
To review the standard fees you may have to pay to Whataburger during this process, you will have the initial franchise fee, the royalty fee, and the advertising fee. The initial franchise fee is a lump sum upfront cost that is paid from the franchisee to the franchisor at the time of signing the franchise agreement. This starts the partnership between the franchisor and franchisee for matters of cooperation and starting the franchise business. The initial franchise fee is not published for Whataburger. However, licensing fees around this category are estimated to be approximately $20,000 to $30,000.
The royalty fee is a type of ongoing fee that is usually paid monthly as a percentage of gross sales. The royalty fee is usually used as a way to continue the franchisor-to-franchisee relationship and sustain cooperation. However, it is reported that Whataburger does not collect a royalty fee. The exact reason is unknown, but it is possible that Whataburger, as a franchisor, may collect some of its revenue through the product supply chain that it provides to its franchisees.
An advertising fee is another type of ongoing fee that is usually paid monthly as a percentage of gross sales. However, an advertising fee is typically set aside for marketing efforts on both a national and local level to further the brand and drive sales. Whataburger does not publish numbers on the advertising fee it charges its franchisees.
That leaves the general costs of starting a Whataburger. This ranges from items that you will have to pay for, like the real estate for your Whataburger location, materials, construction, equipment, inventory, and other general business expenses. The estimated average cost of starting a Whataburger is approximately $2,000,000 to $2,500,000. This initial investment may seem to be high. However, when you think of the types of costs involved in starting a Whataburger restaurant, the costs might make more sense. Especially when this cost is put into the context of its competitors like McDonald’s and Burger King, this cost can be pretty reasonable.
Remember that you will need to be on a plan to open up five franchises in five years. That means that the estimated total expense of an initial investment into Whataburger is not just a $2,000,000 or $2,500,000 figure. This means that your cost over these five years to just get the locations off the ground can amount to $10,000,000 to $12,500,000. You should be financially prepared to make these investments and be aware that you might have to cover some unexpected costs along the way.
You should also keep in mind that these costs are estimates. A lot will depend on the location that you are building or whether you are renting and so on. There are many factors that end up influencing the costs, and the best determinant of what your costs are likely to be is your unique situation. That is why it is important to consider these costs as simply general estimates.
A further comment should be made in that the best estimates of your potential costs will be in the FDD that you get from Whataburger. By applying for more information on their website, you can get more accurate information that can help you in this financial decision. Especially given the scale of the commitment, you should carefully consider the investment that you are going to make.
Initial Franchise Fee: $20,000 to $30,000 (estimated but not disclosed)
Initial Investment: $1.2 million
Net Worth Requirement: $12.5 million
Liquidity Requirement: $5 million
Royalty Fee: Not disclosed
Ad Fee: Not disclosed
As a potential franchisee, understanding the advantages of owning a Whataburger franchise can help you cement your decision. You can then be confident in your decision-making as you get closer to applying and signing for a Whataburger franchise.
Whataburger has many advantages. The first is its menu. Whataburger has a famous menu of burgers that they offer. In addition, Whataburger offers chicken sandwiches, chicken tenders, fries, onion rings, salads, milkshakes, and many more items. With both breakfast and non-breakfast menus, Whataburger has many popular menu items. Undeniably, one of the foundations of the success of Whataburger is its reputation for delicious products. These products extend to the dipping sauces they have too, including famous ones like their Spicy Ketchup. In all, franchising with Whataburger means having access to a provenly-successful menu.
Another advantage of owning a Whataburger is being able to implement its successful business model. The growth of the Whataburger brand has been slower than other brands like Wendy’s, for example. Yet, Whataburger has a massive customer base and a reputation for great foods that very likely exceeds that of a Wendy’s franchise, for example. Whataburger’s more sustainable growth may be linked to a successful business model that they do well in at nearly every location.
The Whataburger brand is similarly a huge advantage. With people instantly knowing what Whataburger is, and many living far away from states with a Whataburger, people want to try the food. Locals who eat at Whataburger simply love it. Franchising with Whataburger means accessing a wide, loyal, and growing customer base that simply loves the food.
One of the other advantages to running a Whataburger is that it comes along with a culture that corporate Whataburger has long promoted. This includes hospitality to the customer, caring about the details of the service, and making sure that everyone has a great experience. Down to the level of what toppings someone would specifically like on their burger is one of their cornerstones of helping to build a great customer experience. This is a mutually beneficial relationship, where this positive culture makes happy customers, who are then more likely to be repeat customers.
As you might be able to see, there are many advantages to franchising with the Whataburger brand.
At the same time, you should consider the disadvantages of franchising with Whataburger. When you eventually decide on whether Whataburger is the right franchising option for you, you should carefully weigh the disadvantages of the brand against the advantages of owning a location.
One of the first and most astounding disadvantages of owning a Whataburger is the size of the investment that will be required to franchise. To franchise a Whataburger, you are going to need to open up at least five units in a five-year period of time. Right out of the gate, this makes owning a Whataburger franchise, or maybe put more aptly, franchises, very inaccessible. Simply, this requirement for franchising makes the option much more difficult who love the brand but can only afford to open up one or two locations. This restriction helps corporate to know that the franchisee will have a very serious, large stake in the franchises that they are running. However, smaller franchisees who might want to operate a Whataburger are out of luck for right now.
Another disadvantage of Whataburger is that it is only currently available in a few states. While opening in some of the newer states that Whataburger is in, like North Carolina, might not be that much of a competitive issue, opening in Texas might be. With so many Whataburger locations around you, you are likely competing with the same brand franchises nearby.
Opening in a completely new state might also be a disadvantage to you. Aside from the hassle involved, you will likely have a much more rigid supply chain of Whataburger products. If your stores run out of certain inventory for operations, you do not have the ability to check in with nearby locations to see if they can help you cover your franchise business.
Another downside to the Whataburger fast food restaurant and the competition it faces is the competition the restaurant will inevitably face from other burger franchises and food franchises in general. Food franchises like McDonald’s, Burger King, KFC, or Taco Bell will take some of Whataburger’s potential customers away. This being said, Whataburger does have a wildly popular menu and following. Whataburger will likely be able to sustain itself against some of the competition. However, choosing the right location and understanding the competition that you would face as a Whataburger franchise owner is important.
As you can see, there are some substantial downsides to the Whataburger franchise opportunity. The competition, expansion issues, and sheer franchise startup costs and requirements are enough to drive many potential franchisees away. In all, you should consider the franchise opportunity according to what is important to you as a prospective franchisee.
After you have weighed the advantages and disadvantages of opening a Whataburger, you may be interested in continuing with a Whataburger franchise application. Before doing so, you need to be ready to meet the requirements for a Whataburger franchise application. Being eligible is a crucial part of having your application accepted.
As is with many franchises, there are two main financial requirements that you will need to meet. The first is a net worth requirement. The net worth requirement required by Whataburger is $12,500,000. This is an astounding figure and is way higher than what is typical for other franchises. The reason for this, however, is likely because they want you to scale to five restaurants and five years as a franchisee. You will need enough net worth to be able to facilitate that kind of growth.
If you are wondering if you meet the net worth requirement, you should start by doing your own calculations. First, consider the value of all of your assets and sum the total of these. These include your house, your cars, any land you own, any major assets that you could sell for value, investments, stocks, savings, cash, gold, and anything else that could be sold. Then, add up the amount of outstanding debt you have. These might be home loans, car loans, student loans, or any other financial obligation you have. The total of these is called your liabilities. Subtract your liabilities from your assets to arrive at your net worth. If your net worth is over $12,500,00, you are eligible to franchise with Whataburger under the net worth requirement.
There is also one other main financial requirement that you need to meet. This is known as the liquid capital, or liquid assets, requirement. Whataburger requires its franchisees to have a minimum of $5,000,000 in liquid capital. This number is also extremely high for the burger franchise industry. However, this again probably makes sense given that Whataburger will want you to open five restaurants over five years.
If you are interested in whether you meet this requirement, start by adding the value of your cash, savings, stocks, and investments that you can sell and convert into cash rapidly. If the amount of these is $5,000,000 or greater, then you meet the Whataburger liquid assets requirement.
The final requirement in being eligible to apply for franchising with Whataburger is that you are interested in opening five restaurants over a five-year period.
While this requirement is almost unheard of in the franchising world, it is unique to Whataburger’s business model. They want to ensure that they have committed franchisees when the franchisees go to start running their Whataburger locations. They want very capable and hands-on franchisees who have the financial ability to grow and expand the business while ensuring that they keep a close watch on the performance of their Whataburger franchises. This will help to retain the famous quality and hospitality of Whataburger locations.
While these three requirements represent the bulk of what is required of a franchisee to franchise with Whataburger, there are some recommended qualities or interests that you portray on your application to increase the likelihood of a successful application.
One of the first of these is being willing to expand the Whataburger brands to new parts of the United States. If you are applying from outside of Texas or in a current state of operation, this might be a plus for corporate Whataburger. Or, if you are applying from a state of operation, being excited to grow the brand in that state is likely a plus for corporate Whataburger.
Another suggestion they make is having a passion or interest in sharing the brand. They want to emphasize the family nature and history of the restaurant alongside the care that Whataburger provides for its customers. The reputation of Whataburger did not get there by being the typical fast food restaurant. As a result, the franchise of Whataburger is very concerned about maintaining its sort of local reputation with the franchise as it grows.
As you can see, the requirements for starting a Whataburger are quite steep. If you want to start a Whataburger and meet the requirements, you are well on track to getting your own Whataburger locations.
While we have just discussed the potential costs of your Whataburger location and, ultimately, locations, it would also be beneficial to consider the potential profit that you can make. Once you have a good idea of the profit, you can compare this to the costs to see if pursuing a Whataburger franchise application appeals to you. You can also help to project your costs and income alongside the additional locations that you would be required to open from corporate Whataburger.
Current estimates suggest that the average franchisee can earn approximately $530,000 a year from a single Whataburger location. This number is quite high and very attractive to prospective franchisees. This is also understandable. Compared to industry averages, the estimates for the profitability of a Whataburger are quite high. If you want a profitable business and have the capital to meet the Whataburger requirements and deploy it into locations, Whataburger might be a fantastic choice for you.
Again, it is important to keep in mind that these numbers are averages. The exact profitability of your Whataburger franchise will depend on its location, the local market, your management, your crew, and many other factors unique to your situation. If you have questions about the specifics of your situation, it might be good to speak with corporate Whataburger about them in the application process. They can help guide you in terms of whether you think your interests are a good fit for the Whataburger brand. You can also look at the FDD that they will provide you with during the application process.
After assessing the costs and profitability estimates of the average franchisee with a Whataburger location, you may have developed a pretty decent idea of the likely return on investment. Indeed Whataburger does have a lot of plusses, and its financial reputation may be just as good as the brand’s reputation. As a result, you are ready to start the franchising process for Whataburger. Now that you are equipped with a good understanding of the franchising aspects of the brand, you are ready to begin the first step.
The first step to franchising with Whataburger is to head over to their site. There you will find information on a franchising section. Continue to the franchising section and locate the start request form. This will send you through a series of questions that you will need to answer diligently to have a good chance of having your application accepted.
The first question on that form revolves around what markets of interest you have in starting your Whataburger locations. Before filling out the form, you should look at the current map of competition for Whataburger locations. Look at where existing Whataburger locations are and try to pick regions that are distinct from those locations. Whataburger is interested in expanding its brand across the USA, so it is important that you can find a new area without Whataburger restaurants to be prepared to start your franchised restaurants.
You should also answer the questions about your finances accurately and make sure that you have met the requirements before applying. You do not want to waste your chance of applying, so it is important to fill it out in a truthful manner.
Whataburger will also ask for your contact details so they can get in touch. After you submit your application, Whataburger will review it and get back to you with more details on the process. This might include interviews or phone calls to discuss the concerns of both sides. In addition, Whataburger will eventually send you an FDD to review and provide you with franchising information. It will then be up to you to decide if you want to proceed with franchising with Whataburger. If so, and if your application is approved, it is then time to sign your franchise agreement and get building!
When it comes to financing a franchise, there are a variety of different loan options that you can take advantage of as a new small business owner. The type or types of loans you will want to take out will vary depending on the business you are planning to start and what your qualifications are. We’ll cover some of the most popular financing options for franchisees in this next section:
Small Business Administration (SBA) loans are one of the most popular loan options for franchisees and other small business owners. These loans are backed by the federal government and, as a result, offer an array of benefits to borrowers. First, since they are backed by the federal government, they often come with some of the lowest interest rates and best terms available. Additionally, they are available to many borrowers who would otherwise be ineligible.
Some of the advantages of SBA loans include lower downpayment requirements, longer repayment term periods, and SBA support services. However, SBA loans also typically have long application processes and can take a great deal of time to obtain. The application process usually requires a lot of paperwork, including financials, credit score checks, and a comprehensive business plan. As such, they are not ideal for last-minute financing.
You will also have to keep in mind that, in order to use an SBA loan for a franchise, the franchise must be pre-approved by the SBA. You can view a list of the SBA’s pre-approved franchises in their online franchise directory.
One of the most popular SBA loans available is their signature SBA 7(a) loan. SBA 7(a) loans offer businesses the ability to access up to $5 million in funding (depending on how much the borrower qualifies for) and can have terms as long as 25 years.
Term loans are a very common and traditional financing option that many small businesses, including franchises, take advantage of. Term loans offer borrowers a lump sum of capital upfront that they can then use to cover a variety of different expenses, including startup costs, equipment purchases, remodeling, and working capital. The term loan is then paid back over a fixed period of time with set monthly or quarterly payments that include both interest expenses and principal payments. Term loans typically come with fixed interest rates, which makes them very predictable and easy to plan for, though they can also have variable interest rates depending on the circumstances.
Term loans are offered by both traditional brick-and-mortar lenders as well as alternative lenders (like Biz2Credit!). Both of these types of lenders come with both pros and cons.
Term loans offered by brick-and-mortar banks are typically very hard to qualify for and come with long application processes. These application processes typically involve a great deal of paperwork and time, meaning you will have to wait a while before you are approved (assuming you end up being approved) and can access the funds. The requirements to be approved are also very stringent, disqualifying many prospective borrowers. That said, because of how thorough the application process is, traditional banks offer some of the lowest interest rates and best terms on the market.
Alternative lenders, on the other hand, are much easier to obtain term loans from. Their application processes are typically very quick and very simple, requiring very little paperwork. Approval and funding can often be obtained in as little as 24 hours. That said, because of the risk these lenders take on with such a limited application process and less stringent borrower requirements, the interest rates are typically higher.
A line of credit is another type of financing that is often used by small business owners. Lines of credit are unique in that they stay open for a long period of time (often as long as ten years), during which borrowers can draw on them for funds at any time. Then, once the funds are repaid with interest, borrowers can borrow the funds again, up to the line of credit’s limit.
Lines of credit are a good resource for every small business to have, as they allow businesses to access cash whenever they need it without having to complete a full loan application process. As a result, they are great for shoring up cash flow or dealing with emergencies. However, because they typically have variable interest rates, lines of credit are not ideal for long-term financing. Instead, they can serve as gap or interim funding while you find a longer-term financing solution.
Equipment financing is another very popular form of financing that small business owners can use to their advantage. As implied by the name, equipment financing is designed to allow businesses to purchase commercial equipment that they need for their business. Equipment financing is unique in that the equipment you purchase with the loan serves as the collateral on the loan. This allows lenders to offer better interest rates and terms since they know they will have something they can liquidate to salvage some of their funds if the borrower ends up defaulting.
Starting a franchise, like any small business, is hard work. But if you think you are up to putting in the time and long hours and have the qualifications to get started, then a franchise can be a great way to break into being a small business owner. As with anything, doing your research is key. So, while this article is a great starting point, there is still a whole lot more to opening a franchise business. Time to start researching!
At Biz2Credit, we know how hard it is to run a successful small business. It takes hard work and dedication. That is why we work hard to provide small business owners with the tools and resources they need to make their businesses a success. As part of this, we run our Biz2Credit Blog, where we post new content each weekday for our readers. So, please continue to check back here for all the latest articles on news, trends, and events impacting small business communities across the nation.
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