Freddy’s Franchise in 2024: Costs, Fee & FDD
Explore Freddy’s Frozen Custard & Steakburgers® franchise—a fast-casual favorite with over 400 locations nationwide. Dive into franchise costs, earnings potential, and what makes this brand a standout investment opportunity. Is Freddy’s your next venture?
Table of Contents:
Freddy’s Frozen Custard & Steakburgers® was co-founded in 2002 by brothers Bill and Randy Simon and their friend Scott Redler. The brand is named in honor of Bill and Randy’s father, Freddy Simon, who was a beloved figure in their family and community. Freddy, a WWII veteran and recipient of the Purple Heart and Bronze Star, instilled a strong sense of patriotism and hard work into his family, which laid the foundation for the franchise’s values. Freddy’s emphasizes quality, hospitality, cleanliness, and timeless traditions, offering a unique dining experience rooted in family values.
At its core, Freddy’s specializes in made-to-order Steakburgers, fresh, frozen custard, and a variety of delicious sides, such as shoestring fries and specialty hot dogs. Its menu offers a blend of American comfort food and a focus on quality ingredients. Frozen custard, made fresh every hour, is a signature treat, and the Steakburgers are cooked to perfection for a flavorful bite. The chain is popular for its nostalgic, classic diner vibe, serving families, fast casual diners, and anyone looking for a satisfying meal with a personal touch.
As of now, Freddy’s has expanded significantly, with more than 400 locations across the United States, with operations in nearly 30 states. This impressive growth reflects the franchise’s success and widespread appeal. While Freddy’s is currently U.S.-focused, its rapid expansion signals potential for international growth in the future. The brand serves millions of customers daily, with many locations seeing a steady stream of guests who return for its nostalgic atmosphere and high-quality food.
Freddy’s franchise support system is robust, offering comprehensive training programs and ongoing operational support. Franchisees receive assistance in site selection, construction, marketing, and training, ensuring they are well-equipped to succeed. Freddy’s also emphasizes a collaborative approach, providing franchisees with the tools and resources necessary to run their business effectively. With a focus on maintaining brand consistency and upholding high operational standards, Freddy’s is committed to helping franchisees thrive. The brand’s family-oriented culture and strong commitment to community engagement make it an appealing opportunity for potential franchisees looking to join a proven and rapidly growing concept.
Freddy’s Franchise Insights
- Freddy’s has expanded to over 400 locations across 30 states, serving millions of customers daily, showcasing its widespread popularity and scalability in the quick-service sector.
- Freddy’s signature frozen custard is made fresh every hour, setting the brand apart from other chains, offering a high-quality treat that keeps customers coming back.
- The franchise is deeply rooted in the values of its founder Freddy Simon, a WWII veteran, emphasizing patriotism, family, and community, which resonates with customers and franchisees alike.
- Freddy’s has built a loyal customer base with its nostalgic atmosphere and consistent product quality, creating a brand that people feel connected to and trust.
- The brand operates in the fast-casual space but emphasizes speed and quality, making it a perfect choice for franchisees looking to serve quality food quickly.
Freddy’s Franchise Key indicators
Growth YOY (%)
14%
vs industry 1%
Total U.S. Franchised Units
484
3-Year Failure Rate
1%
vs industry 10%
Sales-to-Investment ratio
1:1
How much does it cost to open a Freddy’s franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Freddy’s franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Freddy’s franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). you can see a breakdown of the costs to open a Freddy’s below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| License Fee | $35,000 | $35,000 |
| Training Costs and Expenses (Travel, Meals, Lodging, and Employee Wages) | $20,000 | $60,000 |
| Construction, Remodeling, and Leasehold Improvements | $950,000 | $1,800,000 |
| Real Property Rent (one month) | $5,667 | $15,750 |
| Security Deposit | $5,667 | $15,750 |
| Computer, Point of Sale Equipment, Outdoor Ordering System and Software, Security Cameras, Drive Thru Headsets | $53,764 | $99,066 |
| Equipment, Furniture, Fixtures and Décor | $350,000 | $500,000 |
| Building Signage / Interior Neon / LED Border | $25,000 | $115,000 |
| Miscellaneous Opening Costs | $8,000 | $15,000 |
| Opening Inventory and Supplies | $10,000 | $25,000 |
| Insurance | $2,000 | $8,000 |
| Grand Opening Advertising | $2,500 | $5,000 |
| Additional Funds – 3 months | $20,000 | $60,000 |
| TOTAL ESTIMATED INITIAL INVESTMENT | $1,487,598 | $2,753,566 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
To open a Freddy’s Frozen Custard & Steakburgers® or a similar quick-service franchise, there are specific financial requirements to ensure that franchisees have the necessary capital to support the business.
- Total Initial Investment The total initial investment for a Freddy’s franchise ranges from $1.49 million to $2.75 million for a standalone location with a drive-thru. This includes costs such as site development, equipment, initial inventory, and other essential business setup expenses. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Required Liquid Assets For Freddy’s, liquid assets typically need to be in the range of $500,000 to $750,000. Liquid assets are cash or assets that can be quickly converted to cash, ensuring that you can cover operating expenses and any unforeseen costs during the early stages of the business.
- Net Worth Requirement Franchisees must usually have a net worth of at least $1.5 million to $2 million to be considered for a Freddy’s franchise. This requirement ensures that potential franchisees have sufficient financial backing and personal assets to weather any potential financial challenges.
How much does a Freddy’s franchise owner make?
Calculating the salary of a Freddy’s franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Freddy’s franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Freddy’s Revenue & Gross Sales
Freddy’s Frozen Custard & Steakburgers® continues to demonstrate strong revenue performance in the quick-service industry. The franchise reported median gross sales of $1,848,546, reflecting its robust customer demand and efficient operations. This figure underscores the brand’s ability to drive high sales volumes.
Which key factors impact the average revenue performance of Freddy’s franchisees?
The impressive performance of Freddy’s franchisee median gross sales is likely driven by several key factors. The brand’s strong emphasis on quality and consistency in both food and service creates a loyal customer base that values its freshly made-to-order meals and frozen custard. The strategic placement of locations, often standalone units with drive-thru capabilities, ensures accessibility and convenience, catering to the preferences of today’s on-the-go customers. Freddy’s focus on creating a nostalgic yet modern dining experience attracts a broad demographic, from families to solo diners. Additionally, the franchise’s comprehensive training and support systems empower franchisees to maintain high operational standards, contributing to sustained success. Effective marketing campaigns and community engagement further enhance local visibility and customer retention, reinforcing its position as a leader in the quick-service space.
Freddy’s Franchise Operational Costs
Opening a Freddy’s Frozen Custard & Steakburgers® franchise comes with several ongoing operational costs specific to running a quick-service restaurant efficiently. Here are the key areas to keep in mind:
- Labor Costs Wages, benefits, and training for employees, including management and hourly staff, form a significant portion of ongoing expenses.
- Food and Supply Costs Maintaining consistent quality means sourcing high-quality ingredients and ensuring proper inventory management to reduce waste.
- Utilities Expenses for electricity, water, gas, and HVAC systems are especially relevant for locations with extended hours and drive-thru service.
- Maintenance and Repairs Regular upkeep of kitchen equipment, dining areas, and the drive-thru ensures operational efficiency and customer satisfaction.
- Technology Systems Costs for point-of-sale (POS) systems, software updates, and other operational tech required for order accuracy and reporting.
By carefully managing these expenses, you can optimize profitability while delivering the exceptional experience Freddy’s customers expect.
Freddy’s Franchise Fees
When investing in a Freddy’s Frozen Custard & Steakburgers® franchise, it’s crucial to factor in ongoing franchise fees that support operations, marketing, and innovation. Here’s a detailed look at the associated costs:
- Royalty Fee Set at 4.5% of all gross receipts, this fee grants access to Freddy’s trusted brand, operational systems, and continuous support, ensuring your franchise benefits from its established reputation.
- National Marketing and Advertising Fund Ranging from 0% to 3% of gross receipts and currently set at 1.5%, this contribution drives impactful national and regional advertising campaigns, enhancing brand visibility and drawing customers to your location.
- Additional Fees Covering essential services like training programs and technology, these variable costs ensure your franchise operates smoothly and stays aligned with Freddy’s quality and innovation standards.
These fees are essential to successfully operating within Freddy’s proven system while benefiting from its robust support and recognition.
Freddy’s Franchise Earnings
The earnings of a Freddy’s Frozen Custard & Steakburgers® franchise owner can vary depending on factors such as location, customer demographics, operational efficiency, and cost control. However, for owner-operators actively involved in the day-to-day management, the business offers strong earning potential.
Based on the latest data, Freddy’s franchises have a median gross sales figure of approximately $1,848,546. For an owner-operator, this translates to estimated earnings of $277,000, reflecting an operating profit margin of 15%. With its established brand and support systems, Freddy’s provides owner-operators an opportunity to achieve substantial returns. The active involvement of franchisees in operations often maximizes growth potential, ensuring higher profitability in a competitive quick-service restaurant market.
How to Open a Freddy’s Franchise
Becoming a Freddy’s Frozen Custard & Steakburgers® franchisee is a detailed process designed to ensure that candidates align with the brand’s values and are well-prepared to operate a successful location. From the initial inquiry to launching your business, here’s an overview of the key steps involved:
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Meet the Freddy’s Team Candidates participate in discovery days or interviews to meet corporate team members, gain insights into operations, and determine mutual compatibility.
- Site Selection and Approval After approval, the franchise team assists in identifying and evaluating potential locations to ensure they meet Freddy’s site requirements and demographic needs.
- Signing the Franchise Agreement Once the location is approved, candidates sign the franchise agreement, formally becoming Freddy’s franchisees.
- Training Program New franchisees undergo a comprehensive training program covering operations, customer service, marketing, and technology systems to prepare them for opening day.
- Construction and Pre-Opening Support Freddy’s team assists with design, construction, equipment installation, and setting up the drive-thru or dine-in facility. Pre-opening activities include staff hiring and marketing initiatives to generate buzz in the community.
- Grand Opening and Operations Launch With support from the corporate team, franchisees open their Freddy’s location and begin operations, benefiting from ongoing assistance and resources.
Pros & Cons
Pros
Established Brand: Freddy’s is a well-recognized brand with a strong reputation for quality and hospitality, making it easier to attract customers.
Proven Financial Performance: The median gross sales and profit margin indicate strong earning potential for owner-operators.
Flexible Formats: Freddy’s offers various models, including standalone units with drive-thrus, providing versatility in location selection.
Broad Customer Appeal: With a menu that caters to diverse tastes and age groups, Freddy’s enjoys a loyal and wide-ranging customer base.
Cons
High Initial Investment: The startup costs for a standalone location with a drive-thru are on the higher end for quick-service franchises, which may be a barrier for some investors.
Competitive Industry: The quick-service restaurant market is highly competitive, requiring franchisees to excel in operations and marketing.
Operational Demands: Running a Freddy’s location involves hands-on management, which may not suit absentee or passive investors.
Limited Global Presence: While strong in the U.S., Freddy’s has yet to expand internationally, which might limit long-term growth opportunities for some investors.
