Panera Franchise Worth It For 2024? 3 Alternatives To Consider…
Panera Bread is an American chain of fast-casual restaurants with over 2,100 locations, all of which are in the United States and Canada. Panera does not sell single-unit franchises, so it is not possible to open just one bakery-cafe.
That said, in this article, we will look at costs for a single-unit franchise based on the latest data we have. This will give you an estimate of what you can hope to see from your locations not adjusted for area growth, inflation, etc.
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How is Panera 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 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 1.6million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.
Panera Franchise Cost
The total investment necessary to begin the operation of a Panera Bread Bakery-Cafe is $1,117,000 to $3,464,000 (excluding real estate and related costs, and landlord allowances), including an initial franchise fee of thirty-five thousand dollars ($35,000) and various initial fees of up to forty thousand dollars ($40,000), payable for optional technology products and services. If you sign an area development agreement to develop a number of Panera Bread Bakery-Cafes, you also will have to pay a development fee. Let’s see how much each thing would’ve cost to start a Panera franchise over the past couple years:
| Category | Actual or Estimated Amount | To Whom Paid |
|---|---|---|
| Franchise Fee | $35,000 | Panera |
| Leasehold Improvements | $402,000 to $1,855,000 | Contractors |
| Equipment | $308,000 to $452,000 | Equipment Vendors, Panera |
| Optional Technology Systems | $0 to $172,000 | Panera |
| Fixtures | $48,000 to $154,000 | Vendors |
| Furniture | $49,000 to $156,000 | Vendors |
| Consultant Fees | $35,000 to $211,000 | Architect, Engineer, Expeditor, etc. |
| Supplies & Inventory | $19,000 to $25,000 | Panera, and other suppliers |
| Smallwares | $28,000 to $62,000 | Suppliers |
| Signage | $18,000 to $97,000 | Suppliers |
| Additional Funds (3 months) | $175,000 to $245,000 | Vendors, Suppliers, Employees, Utilities, Landlord, etc. |
| TOTAL | $1,117,000 to $3,464,000 (excluding real estate and related costs, and landlord allowances) |
Panera Franchise Requirements
To become a Panera Area Developer in 2022, you need to meet the following criteria:
- Experience as a multi-unit restaurant operator
- Recognition as a top restaurant operator
- Net worth of $7.5 million
- Liquid assets of $3 million
- Infrastructure and resources to meet our development schedule
- Real estate experience in the market to be developed
- Total commitment to the development of the Panera Bread brand
- Cultural fit and a passion for fresh bread
Owning a Panera Franchise Requires Ongoing Fees
| Type of Fee | Amount |
|---|---|
| Royalty | 5% of Net Sales |
| Advertising | |
| – National Advertising Fund (“NAF”) | 2.6% of Net Sales |
| – Local Advertising Funds (“LAF”) | 2.0% of Net Sales |
| – Marketing Administration Fee (“MAF”) | 0.4% of Net Sales |
| – Advertising Association | Determined by Advertising Association |
How much do Panera franchise owners make?
2,121 Panera Locations in 2021 made $5,725,000,000 locations, amounting to Average Unit Volume of $2,699,198.
2021 Panera Average Unit Volume: $2,699,198
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $2,290,500 | 12.5% | $337,399 | 8.25 years |
| 15% | $404,879 | 7.25 years | |
| 17.5% | $472,359 | 6.5 years |
Based on the median sales provided by Panera’s franchise locations, at an average of a 15% profit margin it will take around 7.25 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 locations; the extent of market penetration and brand awareness that Panera stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Panera Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Panera 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.
Estimated Selling Price = EBITDA * 5
When you go to sell a Panera franchise based on the EBITDA multiple of 5x and EBITDA for 2021 of $404,000, it would sell for $2,020,000. This is slightly lower than the midpoint investment of $2,290,500.
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.
How many Panera units have opened and closed?
There were 2,093 units in 2018 and 2,121 units in 2021.
What are alternatives to a Panera franchise?
Here are some other top fast-casual restaurants that offer franchises that you might want to consider:
Moe’s Southwest Grill
Moe’s Southwest Grill, founded in Atlanta, Georgia in December 2000 by Raving Brands originated as an acronym for Musicians, Outlaws, and Entertainers(Moe’s). It is a part of the Focus Brands portfolio of brands along with Schlotzsky’s, Carvel, Cinnabon, McAlister’s Deli, Jamba, and Auntie Anne’s brands. The food offerings of Moe’s include burritos, tacos, quesadillas, nachos, salads, stacks, burrito bowls, and house-made seasonal salsas. The menu offers add-on ingredients for customization in various offerings on the menu. chips and salsa are offered with each order, on the side.
Moe’s franchise requires that there is a multiunit operating experience with the ability to open 3+ locations. The franchisee has a people development orientation and a strong community connection for grassroots marketing in addition to a fun-loving and energetic personality.
The estimated total investment necessary to begin the operation of a Moe’s Franchise ranges from $566,300 to $1,585,610. The initial Moe’s Franchise Fee is $30,500. You have to pay this upfront fee when opening a Moe’s franchise.
Based on the median sales provided by Moe’s franchise locations, at an average of a 20% profit margin it will take around 7.5 years to recoup your investment. This is longer than other franchise opportunities.
Applebee’s
Applebee’s is an American Restaurant chain that focuses on casual dining offering salads, chicken, pasta, burgers, and “riblets.”
It is one of the world’s largest casual dining brands with $3.1B in sales and 12.2% of the Casual Dining market share. As of December 31, 2021, there were 1,584 restaurants in all 50 states, Puerto Rico, Guam, and 11 other countries. Applebee’s is more than 95% franchised with 31 franchisees who own an average of nearly 50 restaurants. The largest Franchisee owns ~29% of U.S. restaurants and the 10 largest Franchisees own 76% of the system.
The estimated total investment necessary to begin the operation of an Applebee’s Franchise ranges from $2,009,201 – $8,266,730. The initial Applebee’s Franchise Fee is $35,000.
When you go to sell an Applebee’s franchise based on the median multiple of .34 and average unit volume estimate for 2021 of $2,641,318, it would sell for $898,048. This is significantly lower than the midpoint investment of $5,137,965.
However, once you make over $5 million in sales, the multiple shifts to 0.86. This helps the restaurants start making up the investment cost. This is the reason behind 95% of Applebee’s franchises being owned by 31 franchisees. As such, you will have to wait some time before selling your restaurant to recover the initial investment.
Applebee’s offers people the opportunity to take a chunk of the American Fast Casual Restaurant pie. However, due to the massive investment required to turn a profit, it is not for people who do not have the money to start multiple franchises. Otherwise, it will take a really long time for people to get their money back.
Jersey Mike’s
Jersey Mike’s Franchise Restaurant offers a wide assortment of made-to-order submarine-type sandwiches, other hot sandwiches, and related food products and beverages for on-premises and off-premises consumption. It’s operated under the name “Mike’s Submarines” from 1956 to 2002 and then changed its name to Jersey Mike’s. In 2019 Sub Above LLC was formed as an indirect wholly-owned subsidiary of Jersey Mike’s Franchise Systems, Inc. JMFS was the former franchisor of Jersey Mike’s franchise system before the closing of the 2019 Securitization Transaction.
The estimated total investment necessary to begin the operation of a Jersey Mike’s Franchise ranges from $194,035 – $954,611. The initial Jersey Mike’s Franchise Fee is $18,500. You have to pay this upfront fee when opening a Jersey Mike’s franchise.
Based on the median sales provided by Jersey Mike’s franchise locations, at an average of a 15% profit margin it will take around 5 years to recoup your investment. This is in the same range as other franchise opportunities.
When you go to sell a Jersey Mike’s franchise based on the median multiple of .34 and Average Unit Volume for 2021 of $1,049,047 it would sell for $356,675. This is significantly lower than the midpoint investment of $574,323.
However, as an owner of multiple Jersey Mike’s franchises, you do have the ability to make a profit. Owners in the Food and Beverage Industry with over $5 million in sales have a median multiple of .86. So, if you had 10 Jersey Mike’s franchises this would be $10,490,470 in sales. This network would sell for $9,021,804. That is going to be a good return on investment on the initial estimated investment of $5,743,230.
Jersey Mike’s has seen consistent franchise unit increases over the last three years and their parent company posted over $100 million in net income in 2020.
With almost 2,000 stores and Peter Cancro as CEO who has been with the business since 1971, it is evident this franchise is filled with enthusiasm for its product.
Conclusion
Panera could be a good investment opportunity but because of the extremely high cost of entering and the required experience, we do not think it should be your first franchise
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.
