(Fast) Food – Franchises and Businesses
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Food Franchise & Business Opportunities
Restaurant Franchise & Business Industry
General Food Industry
The food 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 1.46 million workers and accounts for about 13% of all U.S. manufacturing 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 320 million American consumers.
The food sector accounts for about 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumer’s disposable personal income (DPI). It has total salesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. of $1.4 trillion, of which $164 billion in value added is generated by the food and beverage industry alone.
Food Industry Trends
Entering a new decade, the Food Industry continues to change. From flexible menu types to delivery and take out 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.
Key Food Industry Numbers
The Paid-in-Full RateReferring to the SBA 7(a) Loan Program, how many businesses in a particular industry paid their SBA loans in full including interest relative to all the businesses in that industry. Note that many businesses are exempt from sharing their loan statuses as part of the… is when the SBA loan is fully paid off by the small business owner including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, indicating financial strength.
The Charged Off RateAlso can be referred to as the SBA Loan Default Rate, the charged off rate is percentage of businesses in set field (e.g. industry) that defaulted their loan, are unable to pay their loan in full, and/or there is no confidence that they will be… is the SBA loan default rate where loans have no confidence in being paid off by the small business owner.
For every 8 SBA loans fully paid including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, 1 SBA loan was unable to be paid back, or defaulted.
*SBA Loan Data from 2010-2019
*Non-Franchise Businesses taken into account: 44,851
Franchises in the Food Industry
The first thing that comes to mind when people hear of “franchising” is notable food concepts like McDonald’s, Steak n’ Shake, and Burger King. In fact, many people are not very familiar with franchise concepts outside of the food and beverage industry. Food is known for bringing people together, fulfilling needs of hunger and desire for experiences. Food franchises (aka restaurant franchises) are often the first thing people correlate with the franchise industry. Food & Beverage is certainly one of the most popular areas of franchising. Although food franchising is often associated with fast food (aka quick service restaurants), the industry also includes: fast casual, coffee, pizza, burger, smoothie, frozen dessert, snacks, and full services restaurants.
Food franchises make up approximately 36% of the total franchise establishments in the United States and 48% of the annual financial output of the U.S. franchise industry. Food & Beverage franchises also make up about 65% of direct franchise employment jobs. The National Restaurant Association expects 1.6 million new restaurant jobs to be created by the year 2027.
Food Franchising Trends
Convenience stores are becoming a force in food service footprint. Convenience store franchises have been increasing their food offerings in recent years. Featured convenient stores such as 7-Eleven has over 8600 stores in the United States.
Another major trend in fast food franchises is slimming down the menu. For instance, McDonald’s menu has ballooned by 70% over the years, leading to a slowdown in service is affecting customer satisfaction. The solution has been to cut down the menu to re-energize salesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue..
How much can a Food franchise cost?
Through our online platform Vetted Biz, we have reviewed over 2,900 businesses and franchises. Currently, almost 25% of the businesses on our platform are food and beverage franchises. Of the food and beverage concepts we have reviewed, total investment amounts can start as low as $3,000 for smaller kiosk concepts all the way up to $6,732,615 for a full-service restaurant. Many factors will affect the investment amount, including but not limited to heavy-duty equipment like grills, or where the food and beverage concept needs to be located. In our research, the average royalty fee takes up 5.3% of gross revenueThe total amount in dollars made in the business before expenses are deducted. See also Sales., and the average marketing fee is 2.3% of the gross revenue. From 2016 to 2018, an average of 2.78% of franchise units ceased operations for reasons other than terminations or non-renewals. Moreover, of the 100 franchises we reviewed, there are approximately 3100 franchise units projected to open next year.
Average Food Franchise Industry Percentage Fees
Standard Food & Beverage Franchise Industry Investment
This metric is the standard industry investment amount for a single unit franchise investment in this industry. Our research and analytics team analyzed over 523 franchise concept investment breakdowns in order to calculate this figure.
The Paid-in-Full RateReferring to the SBA 7(a) Loan Program, how many businesses in a particular industry paid their SBA loans in full including interest relative to all the businesses in that industry. Note that many businesses are exempt from sharing their loan statuses as part of the… is when the SBA loan is fully paid off by the franchisee including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, indicating financial strength.
The Charged Off RateAlso can be referred to as the SBA Loan Default Rate, the charged off rate is percentage of businesses in set field (e.g. industry) that defaulted their loan, are unable to pay their loan in full, and/or there is no confidence that they will be… is the SBA loan default rate where loans have no confidence in being paid off by the franchisee.
For every 9 SBA franchise loans fully paid including interestA payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off…, 1 SBA franchise loan was unable to be paid back, or defaulted.
*SBA Franchise Loan Data from 2010-2019
*Franchise Businesses taken into account: 15,203
Sample Food Franchise Income Statement
| Year 1 | ||||
|---|---|---|---|---|
| Base | % of Revenue | High | % of Revenue | |
| SalesThe total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. | $ 400,000 | 100% | $ 500,000 | 100% |
| Cost of Goods SoldAlso known as Cost of Sales, Cost of Goods Sold includes the direct costs associated with generating revenue. Depending on the business, it can be physical products, supplies, and/or payroll. More | $ 80,000 | 20% | $ 100,000 | 20% |
| Gross ProfitThe profit a business makes after deducting the costs involved in making, providing, and selling the goods and services. In an income statement, it is the sales minus the cost of goods sold.Gross profit = Revenue – Cost of Goods Sold | $ 320,000 | 80% | $ 400,000 | 80% |
| Expenses | ||||
| Rent | $ 80,000 | 20% | $ 100,000 | 20% |
| Utilities | $ 0 | 0% | $ 0 | 0% |
| Marketing / Advertising | $ 40,000 | 10% | $ 45,000 | 9% |
| Insurance | $ 1,500 | 0% | $ 1,500 | 0% |
| RoyaltiesFees paid by a franchisee to their franchisor in order to operate a franchise location. They are usually on a weekly or monthly basis. More | $ 36,000 | 9% | $ 45,000 | 9% |
| Salaries / Wages | $ 120,000 | 30% | $ 150,000 | 30% |
| Repairs and Maintenance | $ 0 | 0% | $ 0 | 0% |
| All other expenses | $ 16,000 | 4% | $ 20,000 | 4% |
| Total Expenses | $ 293,500 | 73% | $ 366,500 | 73% |
| Owner BenefitThe amount of money a business owner receives before taxes from a business’s operations over the course of a year. More | $ 26,500 | 7% | $ 33,500 | 7% |
| Net Profit MarginThe net profit margin shows how much a business is generating profit for every dollar of cost, expenses, interest, and taxes involved. It is displayed as the percentage of how much of each dollar collected by a company as revenue translates to net profit. The… | 7% | 7% | ||
| Year 3 | ||||
| Base | % of Revenue | High | % of Revenue | |
| Sales | $ 484,000 | 100% | $ 605,000 | 100% |
| Cost of Goods Sold | $ 96,800 | 20% | $ 121,000 | 20% |
| Gross Profit | $ 387,200 | 80% | $ 484,000 | 80% |
| Expenses | ||||
| Rent | $ 87,000 | 18% | $ 108,900 | 18% |
| Utilities | $ 0 | 0% | $ 0 | 0% |
| Marketing / Advertising | $ 38,700 | 8% | $ 48,400 | 8% |
| Insurance | $ 1,500 | 0% | $ 1,500 | 0% |
| Royalties | $ 43,600 | 9% | $ 55,000 | 9% |
| Salaries / Wages | $ 111,300 | 23% | $ 139,000 | 23% |
| Repairs and Maintenance | $ 0 | 0% | $ 0 | 0% |
| All other expenses | $ 19,400 | 4% | $ 24,200 | 4% |
| Total Expenses | $ 301,500 | 62% | $ 376,500 | 62% |
| Owner Benefit | $ 85,700 | 18% | $ 107,500 | 18% |
| Net ProfitAlso known as net income or net margin, the net profit is the net income on an income statement. It is the revenue minus the cost of goods sold, expenses, interest, and taxes.Net Profit = Revenue – Cost of Goods Sold – Expenses – Interest – Taxes Margin | 18% | 18% |
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