Carl’s Jr. Franchise Sales Continue to Fall with Unit Count Stagnant (2024)
Carl’s Jr. is a fast food restaurant chain founded in 1941 by Carl Karcher and headquartered in Franklin, Tennessee. Carl’s Jr. is known for its burgers, fries, and shakes. Each restaurant also offers a breakfast menu and a kid’s menu. In addition to its signature menu items, their menu features several other items such as salads, wraps, and sandwiches. Carl’s Jr.’s breakfast menu includes items such as pancakes, biscuits, and omelets. Carl’s Jr franchise employees are trained to provide friendly, fast, and efficient service. The company also offers a satisfaction guarantee on all of its menu items.
Carl’s Jr. burgers are made with 100% Angus beef and are served on a sesame seed bun. Their fries are hand-cut and cooked in 100% trans-fat-free vegetable oil. Carl’s Jr. shakes are made with real ice cream and come in a variety of flavors including chocolate, vanilla, and strawberry. In 2022, Carl’s Jr. had 1,676 franchised or company-operated restaurants.
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How Is Carl’s Jr. Franchise Positioned in the Food and Beverage Industry?
The Food and Beverage industry is a significant contributor within regional economies and to the U.S. economy. It is a stable industry in terms of employment and labor income due to the consistent demand for food. In addition, it employs 14.6 million workers and accounts for about 13% of all U.S. service employment. It is an industry that has developed important innovations over time, quickly responding to the changes in consumer demand and meeting the needs of 330 million American consumers.
The Food and Beverage sector accounts for about 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI). It has total sales of $1.4 trillion, of which $164 billion in value added is generated by the Food and Beverage industry alone.
Entering a new decade, the Food and Beverage industry continues to change. From flexible menu types to delivery and takeout playing a huge part in the industry, customers are becoming more demanding. With that said, the public is requesting several new types of dining experiences, including: customization, dietary options, global foods, sustainability, ethical sourcing, value, and convenience. The solution is for businesses in the industry to adapt and always innovate together with the trends positioned by the consumers.
The main competitors of Carl’s Jr. in the market include Wendy’s, Hardee’s, Taco Bell, Jack in the Box, and Burger King.
How Much Is a Carl’s Jr. Franchise?
The initial Carl’s Jr. Franchise Fee differs based on the number of Carl’s Jr franchise restaurants you are going to operate and whether people have entered the Development Agreement. Details are shown in the following table.
- If you have not entered into a Development Agreement, you will pay an Initial Franchise Fee as set forth in the following schedule, depending on the total number of Franchised Restaurants you currently operate:
| Total Number of Franchised Restaurants Operated by You, Including the Restaurant to Be Established | Initial Franchise Fee for the Franchised Restaurant to Be Established |
|---|---|
| 1-2 | $35,000 |
| 3-4 | $30,000 |
| 5 or more | $25,000 |
2. If you sign a Development Agreement under the terms of this Disclosure Document, you will pay an Initial Franchise Fee for each Franchised Restaurant developed under the terms of the Development Agreement as set forth in the following schedule:
| Total Number of Franchised Restaurants Operated by You, Including the Restaurant to Be Established | Initial Franchise Fee for the Franchised Restaurant to Be Established |
|---|---|
| 1-2 | $25,000 |
| 3-4 | $20,000 |
| 5 or more | $15,000 |
Carl’s Jr. Franchise Cost
The estimated total investment necessary to begin the operation of a Carl’s Jr. franchise ranges from $1,607,000 – $2,194,500 (does not include real estate costs).
The following costs are part of the upfront costs included in the initial investment for a Carl’s Jr. Many of these are one-time fees that are needed to launch the franchise.
Review the chart below to see how much it costs to buy a Carl’s Jr franchise in 2022.
Estimated Initial Investment
| Type of Expenditure | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Fees to CJR: | |||
| Initial Franchise Fee | $15,000 | $35,000 | CJR |
| Opening Training Support Team Fee | $0 | $10,000 | CJR |
| Total Fees to CJR: | $15,000 | $45,000 | |
| Build-Out Costs: | |||
| Real Property | Variable | Variable | |
| Building | $575,000 | $665,000 | Contractor |
| Site Improvements | $250,000 | $415,000 | Contractor |
| Soft Costs | $90,000 | $120,000 | Architect, City/County Utilities, etc. |
| Equipment | $357,000 | $410,000 | Vendors, HED |
| Signage | $75,000 | $110,000 | Vendors, HED |
| Point of Sale System | $35,000 | $45,000 | Vendors, CJR |
| Total Build-Out Costs: | $1,382,000 | $1,765,000 | |
| Preliminary Operating Expenses: | |||
| Initial Training | $20,000 | $60,000 | Third parties |
| Pre-Opening Costs | $8,000 | $23,000 | Vendors |
| Additional Funds – 3 months | $160,000 | $250,000 | Vendors, CJR |
| Total Preliminary Operating Expenses: | $188,000 | $333,000 | |
| TOTAL ESTIMATED INITIAL INVESTMENT FOR A CARL’S JR RESTAURANT | $1,585,000 (does not include real estate costs) | $2,143,000 (does not include real estate costs) | |
| Additional Expenses for a Dual Concept Restaurant: | |||
| GB Initial Training | $0 | $10,000 | Third parties |
| GB Construction/Improvements | $4,500 | $9,000 | Vendors, CJR |
| GB Equipment | $8,000 | $13,000 | Vendors, HED |
| GB Signage (exterior only) | $5,000 | $14,000 | Vendors, HED |
| GB Miscellaneous Opening Costs | $3,000 | $3,800 | CJR, vendors |
| GB Opening Inventory | $1,500 | $1,700 | Vendors |
| Total Additional Expenses for a Dual Concept Restaurant | $22,000 | $51,500 | |
| TOTAL ESTIMATED INITIAL INVESTMENT FOR A DUAL CONCEPT RESTAURANT | $1,607,000 (does not include real estate costs) | $2,194,500 (does not include real estate costs) | |
Requirements
- The Minimum Liquid capital to own a Carl’s Jr. franchise is $300,000.
- The net worth required is $1,000,000.
- The unit size should between 2,500 sq. ft. to 3,037 sq. ft.
- 20-year term of agreement
Ongoing Fees
Use the Item 6 table and Item 11 to record the Royalty Fee, Marketing Fee, and other important ongoing fees that the franchisor has. This shouldn’t be more than 3 – 7 fees.
Royalty: 4% of Gross Sales
Marketing Fee: 6% of Gross Sales
The royalty fee for Carl’s Jr. is much lower compared with the 5.3% in the Food and Beverage industry as a whole, but the marketing fee for Carl’s Jr. is much higher compared to the 2.3% of Gross sales in the whole industry.
How Much Do Carl’s Jr. Franchise Owners Make?
The following table represents average fiscal year 2019 financial performance for the 46 domestic Carl’s Jr. Restaurants and Dual Concept Restaurants that were operated by the company for all of fiscal year 2019 (which ended on the last Monday in January and which consisted of 52 weeks) and that were remodeled to the Classic Star or Contemporary restaurant design (“Company-Operated Restaurants”).
| Sales > $2.1M | Sales<$2.1M | All Restaurants | |
|---|---|---|---|
| 26 Restaurants | 20 Restaurants | 46 Restaurants | |
| GROSS RESTAURANTS (Number % of Restaurants Attained or Surpassed Average) | $2,398,404 | $1,785,545 | $2,131,944 |
| 8 (31%) | 12 (60%) | 25 (54%) | |
| TOTAL MATERIALS (Number % of Restaurants Attained or Surpassed Average) | $628,841 (26%) | $465,619 (26%) | $557,875 (26%) |
| 8 (31%) | 12 (60%) | 24 (52%) | |
| TOTAL LABOR & BENEFITS (Number % of Restaurants Attained or Surpassed Average) | $712,025 (30%) | $564,133 (32%) | $647,724 (30%) |
| 10 (38%) | 13 (65%) | 20 (43%) | |
| TOTAL OPERATING EXPENSES (Number % of Restaurants Attained or Surpassed Average) | $2449,454 (10%) | $205,209 (11%) | $230,217 (11%) |
| 7 (27%) | 12 (60%) | 17 (37%) | |
| ADVERTISING (Number % of Restaurants Attained or Surpassed Average) | $152,213 (6%) | $113,364 (6%) | $135,322 (6%) |
| 9 (35%) | 12 (60%) | 26 (57%) | |
| RESTAURANT EBITDAR (Number % of Restaurants Attained or Surpassed Average) | $655,871 (27%) | $437,220 (24%) | $560,805 (26%) |
| 9 (35%) | 13 (65%) | 26 (50%) | |
| HIGH GROSS SALES | $3,798,177 | $2,086,285 | $3,798,177 |
| LOW GROSS SALES | $2,120,457 | $812,512 | $812,512 |
| MEDIAN GROSS SALES | $2,247,087 | $1,808,964 | $2,144,470 |
Annual Franchise Expenses Not Included in Above Table (assuming Median Gross Sales)
| ROYALTIES (4%) | $110,605 | $82,378 | $98,333 |
|---|
The following table represents average fiscal year 2019 financial performance for the 1,046 domestic Carl’s Jr franchise Restaurants and Dual Concept Restaurants that were operated by franchisees for all of fiscal year 2019 (which ended on the last Monday in January and which consisted of 52 weeks) and that were remodeled to the Classic Star or Contemporary restaurant design (“Franchised Restaurants”).
| Sales > $2.1M | Sales<$2.1M | All Restaurants | |
|---|---|---|---|
| 535 Restaurants | 511 Restaurants | 1,046 Restaurants | |
| GROSS RESTAURANTS (Number % of Restaurants Attained or Surpassed Average) | $1,564,552 | $943,179 | $1,260,994 |
| 226 (42%) | 277 54%) | 478 (46%) | |
| HIGH GROSS SALES | $3,303,900 | $1,198,988 | $3,303,900 |
| LOW GROSS SALES | $1,202,912 | $413,593 | $413,593 |
| MEDIAN GROSS SALES | $1,484,672 | $959,612 | $1,212,022 |
2019 Carl’s Jr. Average Franchise Sales: $1,564,552
2020 Carl’s Jr. Average Franchise Sales: $1,205,079
2021 Carl’s Jr. Median Franchise Sales: $1,678,246
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $1,900,750 | 10% | $145,161 | 14.5 years |
| 15% | $217,742 | 9.5 years | |
| 20% | $290,322 | 7.5 years |
Based on the sales provided by Carl’s Jr. franchise locations, at an average of a 20% profit margin it will take around 6.5 to 7.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 20% profit margin, which would elongate getting a return on your investment.
This is just an estimated sales based on the franchisor’s income statement and can vary greatly depending on the length that the particular franchise location has been open and how well the business is run.
Is the Carl’s Jr. Franchise Profit Worth the Franchise Cost?
As seen in the sales figures above, it takes a long time to recoup your investment if you own one singular Carl’s Jr. The best-case scenario would be based on 2019 sales figures, and a 20% profit margin would recoup your investment in 6.5 years.
Based on the current data from Bizbuysell, the asking price now for an existing Carl’s Jr. is $2,400,000, which is higher compared with the initial investment, so if the investors are going to sell the restaurant in the future, the Carl’s Jr franchise might be able to recover its initial investment.
| Asking Price: | $2,400,000 | Cash Flow: | N/A |
| Gross Revenue: | N/A | Inventory: | N/A |
| EBITDA: | $582,000 | Established: | N/A |
| FF&E: | N/A |
Carl’s Jr. Income Statement Key Insights
Statement of Income
| Years ended in January 2, | Fiscal 2019 | Fiscal 2018 | |
|---|---|---|---|
| Revenues | |||
| Company-operated restaurants | $249,735 | $313,684 | |
| Franchised restaurants and other | 294,400 | 291,785 | |
| Total Revenue | 544,135 | 605,469 | |
| Operating costs and expenses | Company-operated restaurants: | ||
| Food and packaging | 69,278 | 87,679 | |
| Payroll and other employee benefits | 75,611 | 93,198 | |
| Occupancy and other | 59,670 | 73,564 | |
| Total company-operated restaurants | 204,559 | 254,441 | |
| Franchised restaurants and other | 107,985 | 103,030 | |
| Advertising | 13,483 | 18,000 | |
| General and administrative | 75,794 | 106,817 | |
| Facility action charges, net | 411 | (19,161) | |
| Total operating costs and expenses | 402,232 | 463,127 | |
| Operating income | 141,903 | 142,342 | |
| Interest expense | (58,013) | (53,462) | |
| Other income, net | 1,388 | 1,577 | |
| Income before income taxes | 85,278 | 90,457 | |
| Income tax expense | 3,460 | 3,199 | |
| Net income | $81,818 | $87,258 | |
Carl’s Jr. is a very profitable business for the franchisor with a net income of $81,818 in 2019. Compared with 2018, when the net income was $87,256, it decreased around 6 percent. A 6% decrease is a reasonable fluctuation for a restaurant, so Carl’s Jr.’s performance could still indicate a potential growth for the company in the future.
How Many Carl’s Units Have Opened and Closed?
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2017 | 505 | 512 | +7 |
| 2018 | 512 | 457 | -55 | |
| 2019 | 457 | 334 | -123 | |
| Company-Owned | 2017 | 121 | 91 | -30 |
| 2018 | 91 | 9 | -82 | |
| 2019 | 9 | 5 | -4 | |
| Total Outlets (United States) | 2017 | 626 | 603 | -23 |
| 2018 | 603 | 466 | -137 | |
| 2019 | 466 | 339 | -127 |
The graph below is the summary of total sales and units of Carl’s Jr franchise from 2017 to 2021 from Franchise Times.
Over the last three years, the company has struggled to grow. The total outlets were decreasing. Overall, in the last three years, the franchises have closed at a rate of over a hundred units a year. This is an indicator that these restaurants may not be performing well. As in 2018 and 2019, nearly 20% of the total restaurants closed. It might be worth discussing the reason behind these failures and finding whether Carl’s Jr. is worth investing. Additionally, a good side for Carl’s Jr. is that it shows that with the increase of the units of the franchise, the total sales are also increasing, which, to a certain degree, indicates that the franchise is profitable.
Conclusion
Investing in a Carl’s Jr franchise is an interesting opportunity, especially for individuals looking to make their way into the Food and Beverage industry. The prospects for growth and success within the industry and the Carl’s Jr. brand itself are extensive, and some markets continue to be available as they move forward with growing their presence across the country. If you are an individual with a passion for owning a restaurant and are willing to invest an amount ranging from $1,607,000 – $2,194,500 (does not include real estate costs) or more, Carl’s Jr. might be the right fit for you.
We strongly recommend you speak to at least 5 Carl’s Jr. franchisees to better understand the financials (see questions to ask).
Think Carl’s Jr. is the right franchise for you, or are you interested in other franchise opportunities in the Food and Beverage industries? Check out our page on the Vetted Biz website for thousands of franchises available for your investment.
