This article is based on its 2022 FDD.
Rita’s Italian Ice, is a privately owned and operated American quick-service restaurant chain. Rita’s opened its first restaurant in 1984 in Bensalem, PA, where the chain is currently headquartered. As of 2022, the chain had 538 restaurants in 31 states, mostly located in the Mid-Atlantic.
The food industry has a significant share within regional economies and the U.S. economy. It employs human resources prominently and is a stable industry providing significant employment and labor income with around 13% of all U.S. manufacturing employment. The industry responds fast to the needs of the customers and has made significant innovations to satisfy the taste buds of the customers. The American consumer market figures over 320 million American consumers and has 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI). The sales of this market clock at around $1.4 trillion and around 10% of this figure is generated by the food and beverage industry alone. With the fast delivery systems in place and drone technology being initiated to deliver food the food and beverage industry shows signs of expansion.
The industry royalty is around 5.3%, marketing expenses are around 2.25%, the stability of units is expected to be over 75%, the growth rate of the industry is more than 15% and the average investment to establish a new unit is $466K.
The initial Rita’s Italian Ice Franchise Fee is $35,000. You have to pay this upfront fee when opening Rita’s Italian Ice franchise.
The estimated total investment necessary to begin the operation of Rita’s Italian Ice Franchise ranges from $278,194 – $502,040. The following costs are part of the upfront costs included in the initial investment for Rita’s Italian Ice. 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 Rita’s Italian Ice franchise in 2022.
|Type of expediture||Amount||To Whom Payment Is To Be Made|
|Initial Franchise Fee||$35,000||$35,000||Us|
|Equipment||$89,744||$144,213||Us and/or Suppliers|
|Permits & Licenses||$1,200||$5,870||Governmental Authorities|
|Signs & Awnings||$5,500||$17,989||Suppliers|
|Initial Order||$8,000||$17,500||Us and/or Suppliers|
|Minimum New Shop Marketing Expenditure||$12,000||$12,000||Us and/or Suppliers|
|Training||$50||$5,000||Food and lodging providers|
|Architect and Attorney Fees||$3,400||$13,487||Architect/Attorney|
|Additional Funds (3 months)||$20,000||$30,000||Your Employees, Suppliers and Cedritors|
A minimum liquidity of $100,000 and a net worth of at least $300,000 is required for a Rita’s location.
|TIER||TOP TIER||MIDDLE TIER||BOTTOM TIER|
|Number of Shops in Tier||161||160||161|
|Highest Gross Sales for Tier||$ 992,642||$ 318,476||$ 235,130|
|Lowest Gross Sales for Tier||$ 318,667||$ 235,168||$ 32,222|
|Average Gross Sales for Tier||$ 414,972||$ 276,219||$ 177,769|
|Number of Shops in Tier that obtained or exceed Average Gross Sales for such Tier||65 (40.4% of Top Tier and 13.5% of the Sample)||78 (48.8% of Middle Tier and 16.2% of the Sample||95 (59.6% of Bottom Tier and 19.9% of the Sample)|
|MEDIAN GROSS SALES FOR TIER||$ 392,397||$ 275,038||$ 189,783|
|Initial investment (midpoint)||%Profit margin of median franchise sales||Estimated Profits||Time to recoup investments|
Based on the median sales provided by Rita’s Italian Ice’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; the extent of market penetration and brand awareness that Rita’s Italian Ice stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
To assign a valuation multiple for Rita’s Italian Ice 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
When you go to sell Rita’s Italian Ice franchise based on the median multiple of .55 and net sales in 2021 of $275,038, it would sell for $151,270. This is significantly lower than the midpoint investment of $390,117.
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.
Rita’s Italian Ice offers people the opportunity to be a part of a business that has multiple models. In this article, we discussed the standalone shop. If you would like us to review other Rita’s concepts, get in touch with us!
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