MOD Pizza Franchise Costs & Fees Worth It? (2022)

Written by: Collins Kibet
Last Updated by Marina Longo: August 5, 2022
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Contents

MOD Pizza Restaurants feature “made on demand” artisan pizzas, salads, desserts, beverages, and other menu items in a unique atmosphere. Also, MOD Pizza Restaurants offer a selection of wines and beers.  The MOD Pizza Restaurant concept was founded in February 2008. It began offering franchises for MOD Pizza Restaurants in 2013.

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Mr. Svenson co-founded the MOD Pizza concept in February 2008. In October 2012, Mr. Svenson became the CEO and a Manager of MOD Pizza, the franchise entity, since its formation in July 2013.

AT THE END OF THE YEAR IN 2020, THERE WERE 490 TOTAL OUTLETS IN THE UNITED STATES: 408 WERE COMPANY-OWNED AND 91 WERE FRANCHISED LOCATIONS.

MOD Pizza competes with other local fast-casual pizza restaurants. However, MOD Pizza does have a competitive edge over big-name companies in terms of the ability it has to sell alcoholic beverages. Its main national competitors are big brand companies such as Pizza HutBlaze Pizza, and Domino’s.

How much is a Mod Pizza Franchise?

The initial franchise fee necessary to open a single MOD Pizza Restaurant is $30,000.

MOD Pizza Franchise Cost

The total initial investment necessary to begin the operation of a MOD Pizza Franchise ranges from $714,000 to $1,092,000. Below is a breakdown of all the costs involved in the calculation of the initial investment cost of a MOD Pizza franchise.

Type of Expenditure Amount (in USD) Method of Payment When Due To Whom Payment Is To Be Made
Low High
Initial Franchise Fee $30,000 $30,000 Lump Sum When you sign the Franchise Agreement MOD Pizza
Leasehold Improvements $303,000 $478,000 As Arranged As Incurred Suppliers
Training Costs $5,000 $18,000 As Incurred As Incurred During Training Employees, Airlines, Hotels, Restaurants and MOD Pizza
Furniture, Fixtures, Suppliers, Décor and Equipment $258,000 $338,000 As Arranged As Incurred Suppliers or Leasing Companies
Site Design, Architectural and Engineering Fees $28,000 $51,000 As Arranged Before Opening MOD Pizza and Suppliers
Signane $28,000 $51,000 As Arranged As Incurred Suppliers
Point-of-Sale and Computer System $5,000 $11,000 As Arranged As Incurred Suppliers
Beer and Wine License Costs $2,000 $15,000 Lump Sum Before Opening Governmental Agencies and Professional Services
Miscellaneous $15,000 $40,000 As Incurred Before Opening or As Otherwise Arranged Landlord, Utilities, Government Agencies, Attorneys, Accountants and Other Professionals
Grand Opening Marketing $10,000 $10,000 As Arranged Within the first 90 days of operations Suppliers
Additional Funds – 3 Months (These figures have not been offset by operating revenues) $30,000 $50,000 As Incurred As Incurred MOD Pizza, Landlord, Suppliers and Utilities
Total $714,000 $1,092,000

Ongoing MOD Pizza Franchise Costs and Fees

Continuing Fee (Royalty): 5% of store’s weekly revenue

Marketing Fee: 2% of store’s weekly revenue

Local Marketing: Minimum of 2% of revenues (1.5% of aggregate revenues if you operate more than one MOD Pizza restaurant)

How much do MOD Pizza owners make?

MOD Pizza does not make any financial performance representations about a franchisee’s future or past financial performance of both company-owned and franchised outlets. However, if you are purchasing an existing outlet, the franchisor or the selling franchisee may provide you with the actual records of that outlet.

We can guesstimate sales figures from the franchise revenue through our analysis of the Franchisor income statement since we know what percentage the royalties take of the gross sales. 

MOD pizza franchise

2019 MOD Pizza Sales and Breakeven Point

Royalty Fee: 5% of revenues(sales)

In 2019 MOD Pizza royalty revenues were $4,916,000

Estimated Total Franchise Sales: $98.3 million

And Estimated Average Franchise Revenue: $1,080,439

Using the estimated average franchise revenue and the midpoint investment, we can predict the time it will take you to recoup your initial investment as shown in the table below:

 

Initial Investment (Midpoint)%Profit margin of average franchise salesEstimated Profits per annumTime to recoup investment (including 2.5 years for scaling up)
$903,000

10%

15%

20%

$108,043

$162,065

$216,087

10.5 years

8 years

6.5 years

 

2020 MOD Pizza Sales and Breakeven Point:

In 2020 MOD Pizza royalty revenues were $3,599,000

Estimated Total Franchise Sales: $71.98 million

And Estimated Average Franchise Revenue: $877,804

 

Initial Investment (Midpoint)%Profit margin of average franchise salesEstimated Profits per annumTime to recoup investment (including 2.5 years for scaling up)
$903,000

10%

15%

20%

$87,780

$131,670

$175,560

12.5 years

9 years

7.5 years

 

franchise specialist

Is the MOD Pizza Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Marco’s Pizza, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the pizza franchise industry’s selling price multiples to determine Marco’s Pizza’s resale value. 

Under $1 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.31

$1 Million – $5 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.34

Over $5 Million Net Sales

  • Estimated Selling Price = Net Sales – 0.86

When you go to sell a MOD Pizza franchise based on the median multiple of 0.31 and net sales averaging $979,121 between 2019 and 2020, it would sell for $303,527. This is almost a third of the midpoint initial investment of $903,000 which is not a great resale value. 

Normally, one is encouraged to own multiple franchises to realize greater profits from a resale. In the case of the MOD Pizza franchise, owning multiple outlets will not guarantee you a profit from a resale. This is because the initial investment cost is very close to the annual average net sales from a MOD Pizza franchise. From our analysis, even if you own 50 franchises you are not guaranteed to make money from a resale. Hence, owning a MOD Pizza franchise should be a long-term investment.

MOD Super-Fast Pizza Franchising, LLC Income Statement

Years ended December 27, 2020, December 29, 2019, and December 30, 2018

(in thousands)December 27, 2020December 29, 2019December 30, 2018
Revenues:   
National marketing fee revenue$8,775$8,359$5,773
Franchise fee revenue5761,115328
Royalty revenue3,5994,9163,834
Total revenue12,95014,3909,935
Expenses:   
Sales and marketing expenses6,8818,0445,191
General and administrative expenses1,1871,7121,486
Total expenses8,0679,7566,677
Net income:$4,882$4,634$3,258

Income Statement Key Insights

To the franchisor, MOD Pizza is a profitable business. In 2020, the company had a net profit of $4.9 million which brought the average net profit of the last three years to about $4.2 million

The net profit has also been increasing since 2018 which indicates that the business is performing well despite the 2020 economic downturn brought by the Covid19 pandemic.

MOD Super-Fast Pizza Franchising, LLC Cashflow Statement

Years ended December 27, 2020, December 29, 2019, and December 30, 2018(in thousands)
Operating activities:
Net income$4,882$4,634$3,258
Adjustments to reconcile net income to net cash provided (used in) operating: activities:
Euity-based compensation expense4698185
Changes in operating assets and liabilities:
Accounts receivable(271)95(335)
Due from affiliates(5,158)(4,912)(4,734)
Prepaid expenses and other current assets10(39)(14)
Accounts payable321115(56)
Accrued expenses and other current liabilities(15)(512)251
Due to affiliates7371,190(6)
Deferred revenue(193)(925)262
Net cash provided (used) in operating activities359(256)(1,189)
Net increase (decrease) in cash359(256)(1,189)
Cash at the beginning of the year2414971,686
Cash at the end of the year$600$241$497

Cashflow Statement Key Insights

The cash flow statement indicates that the company has healthy financials as it retained cash at the end of 2020, 2019, and 2018. The largest amount of cash that was retained was $600,000 in 2020. 

How many outlets have opened and closed?

 
Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised2018729321
20199391-2
20209182-9
Company-Owned201822530277
201930237674
202037640832
Total Outlets201829739598
201939546772
202046749023

 

MOD Pizza has more company-owned outlets than franchised outlets.

At the end of 2020, there were a total of 490 outlets: 408 company-owned and 82 franchised.

In 2018, 21 new franchised outlets were opened unlike in 2019 and 2020 which saw a net negative change of 2 and 9 respectively.

Competition

MOD Pizza competes with other local fast-casual pizza restaurants. However, MOD Pizza does have a competitive edge over big-name companies in terms of the ability it has to sell alcoholic beverages. Its main national competitors are big brand companies such as Pizza HutBlaze Pizza, and Domino’s.

Conclusion

This franchise has a good business model and is trying to execute in the fast-casual space. Their model also has the added benefit of serving alcohol to improve average ticket sales and reach a broader audience.

While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in Food and Beverage Industry.

franchise specialist

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