The Halal Guys Franchise: Costs, Profits, and More
This article is based on the video featured above, originally recorded for Vetted Biz Youtube Channel
The Halal Guys is a quick-service restaurant franchise concept that primarily focuses on selling American Halal food items like signature meats, sauces, and gyro. They originated as a series of food carts in Manhattan, New York, and then eventually evolved into brick and mortar restaurants. They were established as a New Jersey corporation in 2014 and started offering franchises that same year. The Halal Guys do not have a history of litigation or bankruptcy. Their current president is Mohamed Abouelenein, who is also the founder of the company.
Halal Guys Franchise Fee
The initial franchise fee for a Halal Guys franchise is $60,000. In the case of multi-unit franchise developers, or opening five franchises, the initial development fee is $180,000.
Halal Guys Franchise Cost
The estimated initial investment for a Halal Guys franchise ranges from $364,850 to $1,162,250.
Halal Guys Additional Cost
Additional Cost Breakdown
| Leasehold Improvements | $150,000 – $500,000 |
| Licenses and Permits | $1,000 – $25,000 |
| Rent – 3 months | $9,000 – $60,000 |
| Security Deposits | $5,000 – $50,000 |
| Blueprints | $5,000 – $20,000 |
| Equipment, Furnishings, and Fixtures | $52,250 – $152,250 |
| Signage | $5,000 – $20,000 |
| Computer System | $5,000 – $20,000 |
| Travel & Living Expenses while Training | $10,000 – $25,000 |
| On-site Opening Assistance | $10,000 |
| Insurance – 3 months | $600 – $15,000 |
| Professional Fees | $2,000 – $10,000 |
| Grand Opening Advertising | $15,000 |
| Opening Inventory and Supplies | $10,000 – $50,000 |
| Delivery Vehicle | $0 – $30,000 |
| Additional Funds – 3 months | $25,000 – $100,000 |
Ongoing Costs and Fees
The royalty fee for the Halal Guys franchise is 6% of gross sales. It is paid each Monday for the previous week ending Sunday.
Advertising and Marketing Payments
There are three different marketing fees that Halal Guys franchisees must pay for advertising purposes. The first is a worldwide creative marketing fee, which is 2% of gross sales. It is paid in the same way and time as the royalty fee. The second marketing fee is a local advertising fee, which is 1% of gross sales. These are not paid to the franchisor, but rather to local advertising vendors every month. The final payment is to an advertising cooperative, which is 0.5% of gross sales.
How Much Does The Halal Guys Franchise Make?
The Halal Guys does not disclose the financial information of their franchisees in Item 19 of their FDD. However, the Franchisor discloses their financial statements, and below are representations of their cash flow and income statement.
The following financial statements are from their 2019 FDD, with reported financials from the previous two years. Overall, the Halal Guys franchise is a profitable company, with a positive net income of about $1,898,117. They make almost $8 million in initial revenues, while their operating expenses are almost $6 million. They have also been able to decrease their accumulated deficit by almost $1,000,000 from the previous year.
The Halal Guys are also able to retain most of their earnings in cash and their cash and cash equivalents (excluding restricted cash) were $1,314,392 at the end of 2019. In fact, the net cash flows lost from operating activities amounts to approximately $300,000. Therefore, even though there are no representations of individual franchise financial performances, the success of The Halal Guys is a possible indicator that franchises will also be successful.
Number of Units Opened/Closed
The Halal Guys franchise system has been growing tremendously from 2016 to 2018. For example, at the end of 2016, there were 19 franchised outlets. By the end of 2018, there were over 60 franchised outlets. This is an increase of over 40 franchises added to the system since 2016. This drastic increase in franchised outlets demonstrates that the Halal Guys franchise has both a high growth rate and high stability rate. In other words, they are able to consistently add new franchises and retain them in the system.
For example, in 2019, 21 new franchised outlets opened and only 4 franchises closed that year.
the success of The Halal Guys is a possible indicator that franchises will also be successful.
Restaurant Industry Overview
Before investing in a franchise or business, it is important to examine the trends of the industry that the franchise or business opportunity is in. For example, it is not wise to invest in a business opportunity that is in a declining industry. Industry data can also be useful for comparing how well a specific franchise does in comparison to other businesses and franchises. Below are the numbers for the Full-Service Restaurant Industry, which were sourced from the Business Reference Guide.
The Numbers
The average profit margin for the chain restaurants segment of this industry is 2.6%.
Ease of replication is 1.90 on a 4.0 scale, with 4.0 being the most difficult.
Industry trend is 2.70 on a 4.0 scale, with 4.0 on the growing end.
Marketability is 3.20 on a 4.0 scale, with 4.0 on the higher end.
One advantage of the restaurant industry is that businesses are very scalable, meaning that once they are able to break profit there is an enormous opportunity for growth.
However, it is also important to remember that the entry investment for restaurants tends to be much higher than the average franchise. This is because there are a lot of upfront and ongoing costs that go into running a restaurant, as well as a lot of health and food safety costs that go into running a food service business.
Conclusion
Overall, the Halal Guys business proves to be a strong franchise system, both in terms of the company financials and the number of units added. However, it is important to keep in mind that the individual financial performances of franchises are not disclosed to the general public, but rather to prospective franchise investors.
Think the Halal Guys franchise is right for you, or are you interested in other franchises and businesses in the Food and Beverage industry? Make sure to check out our listings page on the Vetted Biz website to explore thousands of investment opportunities available for you.
