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Huddle House Franchise Cost Recouped in 7 to 15 Years (2023)

Written by: Vetted Biz Franchise Research Team
Last Updated by Ailen Faiad: January 24, 2023
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This article is based on its 2022 FDD

Huddle House Franchise is a casual, family-style restaurant chain that has been serving breakfast, lunch, and dinner to customers across the United States since 1964. Founded in Decatur, Georgia, Huddle House has a long history of providing a warm and welcoming atmosphere for people to gather and enjoy a meal.

The first Huddle House restaurant was opened by John Sparks, who saw a need for a place where people could come together and enjoy a good meal at any time of day. Today, Huddle House has more than 400 locations across 25 states and is known for its comfort food, friendly service, and affordable prices.

Over the years, Huddle House has become a staple in many communities and is often where locals go to catch up with friends, watch a sports game, or just enjoy a hearty meal.

Contents

How Is Huddle House 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 14.6 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 1.6 million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.

Huddle House Franchise

How Much Is a Huddle House Franchise?

The initial Huddle House Franchise Fee is $35,000. You have to pay this upfront fee when opening a Huddle House franchise.

Huddle House Franchise Cost

The estimated total investment necessary to begin the operation of a Huddle House Franchise ranges from $576,310 to $1,421,175. The following costs are part of the upfront costs included in the initial investment for a Huddle House. 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 Huddle House franchise in 2022.

Type of expeditureAmountTo Whom Payment Is to Be Made
LowHigh
Initial Franchise Fee$35,000$35,000HHI
Training fee and travel and living expenses while training$23,000$40,000HHI (for training fee); Suppliers, Transportation, Food and Lodging
Real estate – Rent for First 3 months$13,500$24,000Third-party Landlord
Improvements$160,000$723,000Contractors
Equipment and seating$170,000$300,000Vendors or HHI
Signs and decor$32,000$75,000Vendors
Site Engineering / Civil plans$8,000$18,000Vendors
Architectural / MEP Drawings$7,500$20,000Vendors
Travel Expenses for Opening Guide Meeting$0$750Suppliers of Transportation, Food and Lodging
Smallwares, Small equipment, opening inventory and uniforms$45,000$56,000Vendors or HHI
POS System$15,500$25,000Vendors
Back Office Software (first 3 months)$375$600Vendors
Help Desk and Maintenance (first 3 months)$735$825Vendors
Computer Related Security Services$1,200$2,000Vendors
Grand Opening Promotion$3,000$5,000Vendors
Miscellaneous Opening Costs$4,000$6,000Vendors, HHI, Governmental Authorities, Utilities
Security Deposit$7,500$15,000HHI
Additional funds – 3 months$50,000$75,000Employees and Vendors
Totals$576,310$1,421,175 
Huddle House Franchise

Ongoing Fees

Royalty: 4.75% of the Net Sales

Contribution to Advertising Fund: 3.0% of the Net Sales

Local Marketing: 1.0% of the Net Sale

How Much Do Huddle House Franchise Owners Make?

Huddle House Franchised Restaurants – Calendar Year 2021 Net Sales

Net SalesAverage Net Sales per UnitHigh Net SalesMedian Net SalesLow Net SalesTotal # of Units (in Net Sales Range)Total # / % of Units Above Average
>$1,113,500$1,349,644$1,903,695$1,272,037$1,113,5362711 / 41%
$723,800 to $1,112,700$885,590$1,099,488$878,194$734,4138841 /47%
$413,000 to $723,400$571,562$723,312$585,088$413,2079349 / 53%
$402,000$315,990$401,961$339,349$200,2202614 / 54%
Total Franchise Restaurants$751,040$1,903,695$712,428$200,220234111 / 47%

2021 Huddle House Median Franchise Sales: $712,428

Initial investment (midpoint)%Profit margin of median franchise salesEstimated ProfitsTime to recoup investments
$998,74210%$71,24215.5 years
15%$106,86411 years
20%$172,4867.5 years

Based on the median sales provided by Huddle House’s franchise locations, at an average of a 15% profit margin it will take around 11 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; and the extent of market penetration and brand awareness that Huddle House stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.

Is the Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Huddle House 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 Huddle House franchise based on the median multiple of .55 and net sales of $712,428, it would sell for $391,835. This is significantly lower than the midpoint investment of $998,742.

Here is an example of a Huddle House franchise for sale:

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.

Huddle House (Franchisor) Income Statement Key Insights

Huddle House, Inc and Subsidiary Consolidated Statements of Operations

 May 3, 2022April 27, 2021April 28, 2020
Revenues   
Revenues$106,127$88,937$99,201
Marketing and revenues$5,603$4,827
Total revenues$111,730$93,764$99,201
Costs and expenses:   
Cost of food, supplies, rental and equipment sales$51,642$42,023$49,505
Selling, general, and administrative expenses$42,129$37,941$41,494
Marketing fund expenses$6,702$5,787
Loss (gain) on disposal of land, property and equipment$302$2,724$(165)
Depreciation and amortization$12,919$12,906$12,640
Total cost and expenses$113,694$101,381$103,474
Operating loss$(1,964)$(7,617)$(4,273)
Other income (expense)   
Interest income$3$3$6
Interest expense$(4,265)$(5,426)$(7,486)
Loss before provision for income taxes$(6,226)$(13,040)$(11,753)
Benefit for income taxes$397$1,924$2,134
Net loss$(5,829)$(11,116)$(9,619)

Huddle House has a consistent loss for the franchisor with losses of $5 million, $11 million, and $9 million in the last three years.

Huddle House Franchise

How Many Huddle House Units Have Opened and Closed?

Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised2019300285-15
2020285260-25
2021260253-7
Company-Owned20194248+6
20204853+5
20215351-2
Total Outlets2019342333-9
2020333313-20
2021313304-9

Over the last three years, the company has been in decline. In the previous three years, franchises have closed at a rate of 13 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

In conclusion, owning a Huddle House franchise can be a lucrative opportunity, but it requires a significant initial investment and has a long payback period. The success of a Huddle House franchise depends on various factors such as location, management, and competition in the market. It is important to carefully consider the costs and potential profits before deciding to invest in a Huddle House franchise.

Additionally, it may be more financially beneficial to own multiple Huddle House franchises rather than just one, as this can attract the attention of private equity firms and potentially result in higher profits. Overall, it is important to thoroughly research and consider all aspects of the Huddle House franchise opportunity before making a decision.

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.

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