Published on 21 Jun 2022 Time 6 min read Last update by 29 May 2024

Cinnabon Franchise Cost Is High for ROI (2024)

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Cinnabon is an American baked goods chain with both stores and kiosks. As of December 2017, they had more than 1,200 stores operating in 48 countries – 939 of those are in America with only one company-owned outlet. It is owned by the same parent company as Auntie Anne’s. Their signature offering is their cinnamon rolls.

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How Is Cinnabon 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 are 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.

Cinnabon competes against other businesses like Krispy Kreme, Auntie Anne’s (yes, even though they have the same parent), and Wetzel’s Pretzels.


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How Much Is a Cinnabon Franchise?

The initial Cinnabon Franchise Fee is $30,500. You have to pay this upfront fee when opening a Cinnabon franchise.

Cinnabon Franchise Cost

The estimated total investment necessary to begin the operation of a Cinnabon Franchise ranges from $233,700 to $546,800. The following costs are part of the upfront costs included in the initial investment for a Cinnabon store. 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 Cinnabon franchise in 2022.

Initial Investment

Type of Expenditure Amount of Expenditure To Whom Payment Will Be Made
Low High
Initial Franchise Fee $30,500 $30,500 Us
Construction and Build Out Costs $97,000 $224,000 Contractors
Permitting $500 $1,000 Government agencies
Equipment Package $25,000 $94,000 Vendors
Millwork $20,000 $36,000 Contractors
Furniture $0 $0 Vendors
Menu Board, Graphics and Interior Signage $3,900 $12,000 Vendors
Exterior Signage $2,500 $7,500 Vendors
Computer System $6,000 $24,000 Vendors
Smallwares $2,500 $5,000 Vendors
Architect/Engineer $6,500 $12,000 Architect
Rent $4,000 $10,000 Lessors
Grand Opening Marketing $3,000 $5,000 Vendors
Legal and Accounting Fees $5,000 $10,000 Lawyers and accountants
Insurance $2,000 $5,000 Insurance companies
Misc. Opening Costs/Office Supplies $1,800 $6,800 Vendors
Security Deposits $0 $15,000 Utility companies; lessors
Training and Support Fees $0 $3,500 Us
Travel and Living Expenses during Training $3,500 $7,500 Airlines, hotels and restaurants
Opening Inventory $5,000 $8,000 Vendors
Additional Funds – 3 Months $15,000 $30,000 Employees, vendors, etc.
Total Initial Investment $233,700 $546,800

These are in the same range as its sister brand and competitor, Auntie Anne’s.

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Cinnabon Franchise Requirements

To start a Cinnabon Franchise you need $120,000+ in Liquid Capital and a $300,000 Minimum Net Worth.

Owning a Cinnabon Franchise Requires Ongoing Fees

Royalty: 6% of Net Sales.

Marketing Fee: 1.5% of Net Sales for non-streetside locations. 3% of Net Sales for streetside locations.

Local Marketing: At least 1% of Net Sales.

These fees are slightly higher than the industry standard with royalty fees being 5.3% on average.

How Much Do Cinnabon Franchise Owners Make?

Quartiles Average Net Sales Number and Percentage of Bakeries Attaining or Exceeding Average Net Sales Median Net Sales Lowest Net Sales Highest Net Sales
Top Quartile $1,018,985 15/43 (35%) $929,817 $772,260 $2,373,388
2nd Quartile $685,782 20/42 (48%) $683,871 $595,413 $756,768
3rd Quartile $508,084 19/42 (45%) $502,215 $416,849 $594,727
Bottom Quartile $326,275 25/42 (60%) $338,599 $178,376 $411,337
Total $637,055 78/169 (46%) $595,413 $178,376 $2,373,388

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2021 Cinnabon Median Franchise Sales: $595,413

Initial investment (midpoint) %Profit margin of average franchise sales Estimated Profits Time to recoup investment
$390,250 5% $59,541 9 years
$390,250 10% $89,311 7 years
$390,250 15% $119,082 5.75 years

Based on the median sales provided by Cinnabon’s franchise locations, at an average of a 15% profit margin it will take around 7 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.

Also, include the time it takes to scale up the business which is typically 1.5 years for service industries and 2.5 years for food industries in your calculation.

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 Cinnabon stores; the extent of market penetration and brand awareness that Cinnabon stores have attained in your market. Also, the quality of management and service at your Franchised Store will affect profits.

Is the Cinnabon Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Cinnabon 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 $1 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.44

When you go to sell a Cinnabon franchise based on the median multiple of .44 and net sales in 2021 of $595,413, it will sell for $261,981. This is lower than the midpoint investment of $390,250. However, the initial investment can be recovered.

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.

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Cinnabon (Franchisor) Income Statement Key Insights:

Consolidated statements of operations (In thousands)

For the fiscal years ended: December 26, 2021 December 27, 2020 December 29, 2019
Revenues:
Franchise revenues $221,276 $166,977 $210,226
Total revenues 221,276 166,977 210,226
Fees and expenses:
Management fee to FBLLC 41,654 42,353 44,098
Selling, general and administrative expenses 404 1,793 462
Depreciation and amortization expense 3,030 3,435 3,929
Total fees and expenses 45,088 47,581 48,489
Operating income 176,188 119,396 161,737
Income before income tax expense 176,188 119,396 161,737
Income tax expense 1,565 1,188 1,637
Net income $174,623 $118,208 $160,100

Cinnabon is a very profitable business for the franchisor with retained earnings of $174 million in 2021. Compared to $160 million in 2019, they saw an increase of 8.75% from 2019 to 2021. This is a good indication of high growth as a company overall.


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How many Cinnabon 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 2019 923 932 +9
2020 932 935 +3
2021 935 938 +3
Company-Owned 2019 1 1 0
2020 1 2 +1
2021 2 1 -1
Total Outlets 2019 924 933 +9
2020 933 937 +4
2021 937 939 +2

Over the last three years, the company has been expanding, albeit not much. Between 2019 and 2021, only 15 new Cinnabon stores opened. That is an average rate of 5 stores per year. Compared to their total of 939 outlets, this might indicate saturation in the market.

Conclusion

Cinnabon has carved a niche market for itself with their offerings of Cinnamon rolls and the name alone invokes cinnamon rolls in the minds of a lot of people. Therefore, Cinnabon has a strong product offering with brand recognition that is very powerful. While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Food and Beverage Industry.

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