Jason’s Deli Franchise is a fast casual restaurant that offers a variety of delicatessen products, as well as sandwiches, soups, baked potatoes, pasta dishes, wraps, and a salad bar, as well as catering and delivery services.
It was founded in Beaumont, Texas on 30 November 1976 by Joe Tortorice Jr. Back in 2008, Jason’s Deli ranked #1 in annual sales in QSR Magazine’s Top Ten list of restaurant groups with under 300 locations.
It currently operates 248 restaurants, with the majority of locations being company-operated.
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 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.
The estimated total investment necessary to begin the operation of a Jason’s Deli Franchise ranges from $1,020,759 to $1,554,891. The following costs are part of the upfront costs included in the initial investment for Jason’s Deli. 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 Jason’s Deli franchise in 2022.
|Type of expediture||Amount||To Whom Payment Is To Be Made|
|Initial Franchise Fee||$35,000.00||Franchisor|
|Development Fee||$17,500 per additional Deli (See Note 1). At least two delis are required, bringing total development fees paid by franchisor to $35,000.||Franchisor|
|Travel and living expenses while training||$15,000.00||Airlines, Hotels and Restaurants|
|Build out or remodeling of 4,500-5,000 sq. ft. premises||$496,900.00 to 0- $766,132.00||Suppliers, Tradesman and Contractors|
|Equipment: *Fabricated Equipment Buyout Equipment; *Furniture; Small Wares Signage||$300,000.00 – $25,000.00 – $24,753.63 – $18,000.00 to $100,000.00||Suppliers|
|Administrative and Miscellaneous: Pre-Opening Advertising Deposits (rent, utilities, and sales tax)||$5,000.00 to $20,000.00||Suppliers and Landlords|
|Licenses Interim Interest Payments Pre-opening training personnel from existing Delis, if applicable||$10,000.00 – $70,000.00 to $125,000.00||Governmental Entities, Suppliers Hotels, restaurants, and/or Travel Providers|
|Insurance||$4,500.00 to $15,000.00||Insurance Company/ Agent|
|Online Ordering SetUp Costs and Monthly Hosting||$450.00 per store and $130 Monthly per store||Third Party Supplier Order Restaurant Revolution Technologies, Inc.|
|Point-Of-Sale System||$3,600 to $6,000 per store & $600 to $1200 monthly per store||Third Party Supplier – NCR|
|Customer Satisfaction/Feedback Software||$60.00/monthly Per store||Third Party Supplier|
|System Email||$150.00/per user account per year||Third Party Supplier Google|
|Initial Inventory||$32,925.82||Suppliers or Franchisor|
|Additional Funds – 3 months||$20,000.00 to $35,000.00||Vendors, Employees and other Third Parties|
|Total||$1,020,759.45 to $1,554.891.45|
Based on the median sales provided by Jason’s Deli’s franchise locations, at an average of a 15% profit margin, it will take around 5.5 years to recoup your investment. This is the same time as other franchise opportunities. You may not get a 15% profit margin, which would elongate getting a return on your investment.
To assign a valuation multiple for Jason’s Deli 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.
When you go to sell a Jason’s Deli franchise based on the median multiple of .55 and net sales in 2022 of $2,080,645, it would sell for $1,144,354. This is just slightly lower than the midpoint investment of $1,287,825.
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.
|Years ended December 31,|
|Sales – delis||$341,495,238||$272,173,485|
|Sales – distribution centers||76,874,473||50,759,622|
|COST OF REVENUE||166,252,053||126,996,909|
|OPERATING EXPENSES, EXCLUDING OWNERS COMPENSATION||233,403,383||213,701,627|
|Operating income (loss) before owners compensation||29,835,727||(9,103,003)|
|Income (loss) from operations||28,434,602||(9,941,022)|
|OTHER INCOME (EXPENSE):|
|Total other expense||(8,011,835)||(4,820,136)|
|STATE INCOME TAXES||448,771||247,045|
|Net income (loss)||$19,973,996||$(15,008,203)|
Jason’s Deli is a very profitable business for the franchisor, with retained earnings of $19.97 million in 2021. Compared to a loss of 15$ million in 2020, this is a good indication of a good recovery from COVID as a company overall.
|Outlet type||Year||Outlets at the Start of the Year||Outlets at the End of the Year||Net Change|
Over the last three years, the company has been in decline. Both franchising units and company-operated stores have decreased. Over the last three years, franchises have closed at a rate of 8 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.
While Jason’s Deli looks good on the surface and has an amazing payback period and resale value, it is mired in a lot of litigation. There is a class action and five lawsuits disclosed in the FDD. These disputes are about overtime wages, and this mess of lawsuits might be why franchisees are not eager to sign up for a Jason’s Deli franchise. Additionally, Jason’s Deli’s website currently has no mentions of franchising. It might mean that they have temporarily stopped franchising.
Jason’s Deli offers people the opportunity to be a part of a business that has amazing returns, but with the decline in units and multiple lawsuits, you should talk to at least 3-5 other franchisees before considering this business.
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