Here’s How Much It Costs to Start a Checkers Franchise in 2023
Written by: Parth Parth
Last Updated by
Rocio Somoza: January 19, 2023
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How is Checkers Franchise Positioned in the Food and Beverage Industry?
The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. Around 1.46 million people get employed in this industry. Food franchises make up to 36% of the total franchise establishments in the USA and it is expected to create 1.6million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.
How Much is a Checkers Franchise?
The initial Checkers Franchise Fee is $20,000 – $30,000. You have to pay this upfront fee when opening a Checkers franchise.
Checkers Franchise Cost
The estimated total investment necessary to begin the operation of a Checkers Franchise ranges from $790,797 – $2,368,316. The following costs are part of the upfront costs included in the initial investment for a Rally’s Restaurants. 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 Checkers franchise in 2022.
| Type of Expenditure | Amount | To Whom Payment is to be Made |
|---|---|---|
| Initial Franchise Fee | $20,000 – $30,000 | Us |
| Initial Advertising Deposit | $10,000 | National Production Fund |
| Restaurant Building Costs | $370,000 – $1,219,243 | Suppliers, Lending Institutions |
| Restaurant Building Shipping Costs | $8,400 – $49,660 | Suppliers |
| Restaurant Equipment & Technology | $177,733 – $226,010 | Suppliers |
| Soft Costs | $889 – $41,380 | Contractors, Suppliers, Lending Institutions |
| Site Development | $150,000 – $641,000 | Contractors, Suppliers, Lending Institutions |
| Signage including Menuboards | $12,775 – $56,023 | Suppliers |
| Inventory | $1,000 – $5,000 | Suppliers |
| Additional Funds | $40,000 – $90,000 | Employees, Suppliers, Utilities, etc. |
| TOTAL ESTIMATED INITIAL INVESTMENT | $790,797 – $2,368,316 |
Checkers Franchise Requirements
For a Rally’s Restaurant, you need a $750,000 minimum net worth of which $250,000 needs to be liquid.
Owning a Checkers Franchise Requires Ongoing Fees
How much do Checkers franchise owners make?
All Checkers Restaurants
| Category of Restaurant | Average Net Sales 2021 Fiscal Year | Number of Restaurants | % Attaining or Exceeding Average | Median Net Sales 2021 Fiscal Year | Low and High Net Sales |
|---|---|---|---|---|---|
| Company-owned | $1,176,064 | 132 | 66 or 50% | $1,177,314 | $285,337 – $2,064,452 |
| Franchised | $1,125,598 | 372 | 158 or 42% | $1,039,773 | $233,924 – $2,724,932 |
2021 Checkers Median Franchise Sales: $1,039,773
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $1,579,556 | 10% | $103,977 | 16.5 years |
| $1,579,556 | 15% | $155,965 | 11.5 years |
| $1,579,556 | 20% | $207,954 | 9 years |
Based on the median sales provided by Checkers’s franchise locations, at an average of a 15% profit margin it will take around 11.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Food and Beverage stores; the extent of market penetration and brand awareness that Checkers stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Checkers Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Checkers franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.55
When you go to sell a Checkers franchise based on the median multiple of .55 and net sales in 2021 of $1,039,773, it would sell for $571,875. This is significantly lower than the midpoint investment of $1,579,556.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Checkers (Franchisor) Income Statement Key Insights:
Checkers Drive-In Restaurants, Inc. and Subsidiaries Consolidated Statements of Cash Flows
| For the Year Ended | |||
|---|---|---|---|
| January 3, 2022 | December 28, 2020 | December 30, 2019 | |
| Operating activities | |||
| Net income (loss) | $(10,066) | $84 | (221,921) |
| Adjustments to reconcile net income (loss) to net cash provided by /used in) operating activities | |||
| Depreciation and amortization | 17,193 | 15,907 | 15,844 |
| Amortization of deferred financing costs | 1,570 | – | – |
| Provision for bad debts | 274 | (2,214) | 3,051 |
| Deferred income tax benefit | (215) | (809) | (2,169) |
| Noncash stock-based compensation | 758 | 857 | 329 |
| Noncash interest on Second Lien Credit Agreement | 9,198 | 11,136 | 6,080 |
| Impairment of goodwill and brands intangibles | – | – | 178,907 |
| Net loss on disposal of fixed assets | 1,305 | 597 | 1,723 |
| Net (gain) loss on sales of restaurants | – | (206) | 3,827 |
| Gain on acquisition of restaurants | – | (1,578) | – |
| Changes in assets and liabilities, net of acquisitions: | |||
| (Increase) in accounts, notes and leases receivables | (685) | (780) | (4,295) |
| Decrease (increase) in inventory | (449) | 116 | 112 |
| Decrease (increase) in prepaid expenses and other current assets | (797) | 477 | 324 |
| (Increase) decrease in other assets | 159 | (107) | 841 |
| (Decrease) increase in accounts payable | (142) | (4,019) | 1,879 |
| Increase (decrease) in accrued liabilities, accrued wages and benefits, deferred revenue, self insurance, and long-term liabilities | (1,205) | 6,713 | 4,748 |
| (Decrease) increase in reserves for restaurant retirement and refranchising costs | (544) | (604) | 1,641 |
| Net cash provided by (used in) operating activities | 16,354 | 25,570 | (9,079) |
Checkers is a very profitable business for the franchisor with retained earnings of $16.35 million in 2021.
How many Checkers units have opened and closed?
Over the last three years, the company has been in decline. Over the last three years, franchises have closed at a rate of around 15 units a year. This is an indicator that these stores may not be performing well or their franchise term is up and they are not renewing it.
Conclusion
Checkers offers people the opportunity to be a part of a business that has a slightly long payback period and shaky financials while recovering from COVID.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage Industry.
