Baskin Robbins Franchise Cost Way Too High (2024)
This article is based on the video featured above, originally recorded for Vetted Biz YouTube channel.
You might not need to be a retail expert to succeed with a Baskin-Robbins franchise.
Ice cream is one of the biggest industries in the US and worldwide and no wonder why – the ice cream industry is one of the few that lets you adapt fast to new trends and consumer preferences. Baskin-Robbins franchise is one of the biggest ice cream shop franchises and you could very well own one.
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Baskin-Robbins Franchise
Baskin-Robbins Franchising has been offering franchises since 2006 and it is located in Canton, Massachusetts.
The ice cream industry is highly competitive! Competitors of Baskin Robbins include very well known franchises in the ice cream industry like Ben & Jerry, Nestle, or Haagen-Dazs as well as other Baskin Robbins ice cream shops nearby.
We will analyze the potential return on investment and whether the initial investment is worth the profit of a Baskin Robbins franchise.
How Much Is a Baskin-Robbins Franchise?
The standard initial fee to open a Baskin Robbins franchise is $25,000. This fee must be paid out of pocket, which means you cannot borrow money to pay for this fee. For every additional unit that you open you have to pay a $25,000 fee.
Baskin-Robbins Franchise Cost (Initial Investment)
The standard initial fee to open a Baskin Robbins franchise is $25,000. This fee must be paid out of pocket, which means you cannot borrow money to pay for this fee. For every additional unit that you open you have to pay a $25,000 fee.
| Type of Expenditure | Category | Amount | To Whom Payment Is to Be Made |
|---|---|---|---|
| Initial Franchise Fee (20-year term) | Build Cost | 12,500 to 25,000 | Us |
| Real Estate Development | Build Cost | 123,000 to 267,000 | Us or Third Parties (Your Landlord and/or Contractor) |
| Equipment, Fixtures and Signs | Build Cost | 115,000 to 197,760 | Approved Suppliers |
| Restaurant Technology System | Build Cost | 1,440 to 15,000 | Approved Suppliers |
| Licenses, Permits, Fees and Deposits | Build Cost | 6,000 to 20,000 | Municipalities, Lessor or Us |
| Opening Inventorty | Other | 5,000 to 8,000 | Us and/or Approved Suppliers |
| Miscellaneous Opening Costs | Other | 9,500 to 28,000 | Suppliers, Utilities, Employees, Etc |
| Uniforms | Other | 400 to 800 | Approved Supplier |
| Insurance | Other | 3,500 to 8,300 | Insurance Company // Agent |
| Travel and Living Expenses While Training | Other | 1,000 to 9,000 | Airlines, Rental Car Agencies, Restaurants, Hotels, etc |
| Marketing Start-Up Fee | Other | 3,000 to 5,000 | Us or Third Parties |
| Additional Funds for First 3 Months of Operation | Other | 0 to 52,000 | Us, Third Parties and Employees |
- Sub-Total Initial Franchise Fee $12,500 to $25,000
- Sub-Total Build Costs $258,000 to $470,521
- Sub-Total Other $22,400 to $111,600
TOTALS $90,985 to $625,185
Baskin-Robbins Ongoing Costs and Fees
- Continuing Franchise Fee: 5.9% of gross sales
- Advertising Fee: 5% of total gross sales
This is significantly higher than other franchises in the industry.
What Is Required to Open a Baskin-Robbins Franchise?
Baskin Robbins has a series of requirements if you want to open a franchise. These requirements include having a net worth of at least $200,000 per unit and a $100,000 liquidity and going through the application process.
Some additional application requirements are:
- Food service or multi-management experience
- Submitting a business plan
- Being passionate about Baskin Robbins and its products
How Much Do Baskin-Robbins Franchise Owners Make?
| Regions | Total Number of Restaurants in Sample | Average Sales | % Restaurants at or Above Average |
|---|---|---|---|
| Total Continental U.S | 882 | $419,003 | 43.65% |
| West – North | 245 | $449,408 | 42.04% |
| West – South | 240 | $478,025 | 42.50% |
| Mountain West | 242 | $363,305 | 40.50% |
| East | 155 | $366,516 | 43.87% |
2019-2020 Franchise Average Net Sales: $419,003
The average net sales in the US are $419,003. However, sales seem to vary significantly depending on the location of the shop. This is important to note as you decide where to open your franchise.
1- Based on a midpoint investment of $358,085 with estimated profits of $41,900 at a 10% profit margin it would take about 10 years to recoup your investment.
2- Based on a midpoint investment of $358,085 with estimated profits of $62,850 at a 15% profit margin it would take about 8 years to recoup your investment.
3- Based on a midpoint investment of $358,085 with estimated profits of $83,800 at a 20% profit margin it would take about 6 years to recoup your investment.
Is Baskin-Robbins Franchise Profit Worth the Franchise Cost?
After a few years in the business, when you go to sell your franchise based on the median multiple of .44 and net sales average from 2019-2020 of $419,003 a Baskin-Robbins franchise would sell for about $184,361. This is 51% less than the midpoint initial investment of $358,085 which means you would most likely be selling at a loss.
Baskin-Robbins Franchise Income Statement
| 12 days ended December 26,2020 | 352 days ended December 14,2020 | December 28, 2019 | December 29, 2018 | |
|---|---|---|---|---|
| Revenues: | ||||
| Franchise fess and royalty income | 17,279 | 550,154 | 596,169 | 563,499 |
| Advertising fees and related income | 14,199 | 440,871 | 474,387 | 455,368 |
| Licensing fees | 574 | 15,694 | 17,570 | 16,798 |
| Other revenues | 122 | 3,495 | 4,176 | 4,132 |
| Total revenues | 32,174 | 1,010,214 | 1,092,302 | 1,039,797 |
| Operating costs and expenses: | ||||
| Advertising expenses | 14,199 | 439,168 | 474,387 | 455,368 |
| Amortization of intangible assets | 2,283 | |||
| Other operating costs and expenses | 189 | 2,759 | 3,861 | 4,113 |
| Total operating costs and expenses | 16,671 | 441,927 | 478,248 | 459,481 |
| Operating income | 15,503 | 568,287 | 614,054 | 580,316 |
| Other income (expense), net: | ||||
| Interest income | 1 | 133 | 409 | 550 |
| Foreign currency gain (loss), net | 3 | (32) | (93) | (178) |
| Total other income, net | 4 | 101 | 316 | 372 |
| Income before income taxes | 15,507 | 568,388 | 614,370 | 580,688 |
| Provission for income taxes | 162 | 3,067 | 3,779 | 3,452 |
| Net income | 15,345 | 563,321 | 610,591 | 577,236 |
Baskin-Robbins is a profitable business for the franchisor with income that surpasses the half million dollars in every fiscal year.
On top of that, Baskin-Robbins is seeing stable growth. Its revenue increased 5% from 2018 to 2019, and despite the pandemic which had a huge impact on competitors like Haagen-Dazs, Baskin-Robbins only saw a decline in revenue of 4% probably thanks to their delivery and take-out options.
How Many Baskin-Robbins Units Have Opened and Closed?
System-wide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2018 | 1,072 | 8 | -79 |
| 2019 | 993 | 24 | -44 | |
| 2020 | 949 | 57 | -55 | |
| Company-Owned | 2018 | 0 | 5 | 0 |
| 2019 | 0 | 7 | 0 | |
| 2020 | 0 | 9 | 0 | |
| Total Outlets | 2018 | 1,029 | 13 | -36 |
| 2019 | 993 | 31 | -44 | |
| 2020 | 949 | 66 | -55 |
The number of franchises have been in decay over the last three years, shrinking at a rate of over 50 outlets a year. This could be an indicator that the franchises are not performing well and that maybe they are not seeing significant profit.
Conclusion
Baskin-Robbins is one of the most popular ice cream franchises in America. Ice cream is also the most popular frozen dairy product in the US, and no matter what, people will always consume it. It is also an industry that lets you adapt to new trends without a significant investment.
If you open a Baskin-Robbins franchise you can recoup your investment in 4 to 8 years depending on your profits, which is still faster than other franchises in the ice cream industry. When you go and sell your franchise, it will be at a loss.
A positive aspect of Baskin-Robbins its robust delivery and take-out system which they continue to advertise which helped franchisees during the Covid-19 pandemic and it can also counter the location effect which makes Baskin-Robbins more accessible to people who do not understand a lot about real estate than other franchises in the ice cream industry.
It is important to note that the number of outlets has been in decline for the last three years. Which could be an indicator that franchise owners might be doing so well.
Our suggestion is to speak to at least one franchise owner before opening a franchise yourself. And to research which would be the best location for your franchise since location has a large impact on net sales.
If you think Baskin-Robbins is the right franchise for you or you want to explore other franchise opportunities, check out our listing page on the Vetted Biz website for thousands of franchises available for your investment.
