Wendy’s Franchise Cost Is Worth The $300,000 Owner Salary (2022)
Written by: Tyler Morris
Last Updated by Marina Longo: August 5, 2022
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Download NowWendy’s is one of the most recognizable restaurant brands in the world. It is famous for its hamburgers, sandwiches, fries, tenders, and milkshakes. The Baconator is one of the most popular items and even has been mentioned by Jim Cramer on his investment show numerous times. Wendys Breakfast has been one of the ways the company in recent years has helped to diversify its revenue streams.
Wendy’s was founded in Columbus Ohio by Dave Thomas in 1969. Thomas went on to serve as the Chief Executive until 1982. While he was not involved in the daily operations he continued to be heavily involved with the company. The family even after his death in 1999 continued to own many franchises. In 2008 Arby’s the third-largest restaurant chain at the time purchased Wendy’s for $2.34 Billion. The brands would later separate and would completely cut ties in 2018.
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How is Wendy’s Positioned in the Food and Beverage Industry?
Food and Beverage account for the most franchises out of any industry in the United States. Additionally, Food and Beverage industry accounts for 5% of U.S. gross domestic product and 10% of national employment. The sector is drastically changing especially given the stay-at-home economy that the Covid-19 pandemic has made a norm. There is a desire for more delivery and take-out options. The industry average royalty fee is 5.3% and 2.3% for the marketing fee.
Wendy’s is well-positioned in the Food and Beverage industry given its national brand recognition. Additionally, its royalty and marketing fees are both 4%, which is closely aligned with industry norms. Wendys at the end of 2021 has a total of 5,938 total locations worldwide.
While other food franchises like Subway, Burger King and Mcdonald’s permanently closed U.S. restaurants in 2020, Food and Beverage had a net increase in unit count.
How much is a Wendy's Franchise?
There are three estimates of the overall cost of opening a Wendy’s franchise. This depends on whether a franchisee is buying, financing, or leasing the land that they are opening their location. See the costs for each type below.
- Buying land outright: $1,887,500-$3,693,000
- Financing land: $556,500-$1,135,000
- Leasing Land: $329,500-$647,500
Please find the detailed breakdown of initial and ongoing costs below:
| Type of Expenditures | Estimated Amount | Method of Payment | When Due | To Whom Payment is to be Made |
|---|---|---|---|---|
| Application Fee | $5,000 | Lump Sum | On Signing Preliminary Agreement | Quality |
| Training Expenses | $26,000 – $100,000 | As Agreed | As Incurred | Third Parties |
| Initial Technical Assitance Fee | $50,000 | Lump Sum | On Signing Franchise Agreement | Quality |
Real Estate, Permits, Construction of Standard Prototype Restaurant and Site Improvements Cash Purchase Financing (3 mos.) Leasing (3 mos.) | $1,147,000 – $2,515,000 $271,000 – $551,000 $24,000 – $63,500 | As Agreed As Agreed As Agreed | As Incurred As Specified in Financing Documents As Specified in Lease or Sublease | Property Owner and Contractors Lender Landlord |
Equipment: Cash Purchase Finaning (3 mos.) | $331,000 – $420,000 $11,000 – $18,000 | As Agreed As Agreed | As Incurred As Specified in Financing Documents | Vendors Lender |
Signane: Cash Purchase Financing (3 mos.) | $58,000 – $100,000 $2,000 – $4,000 | As Agreed As Agreed | As Incurred As Specified in Financing Documents | Vendors Lender |
Technology: Cash Purchase Financing (3 mos.) | $65,000 – $100,000 $3,000 – $4,000 | As Agreed As Agreed | As Incurred As Specified in Financing Documents | Vendors Lender |
| Opening Inventory and Supplies | $13,000 – $18,000 | As Agreed | As Incurred | Vendors |
| Additional Funds – 3 Months | $150,000 – $192,000 | As Agreed | As Incurred | Franchisee Employees / Vendors |
| Grand Opening Advertising | $7,500 – $10,000 | As Agreed | As Incurred | Advertising Sources |
| Security Deposit, Utilities, Licenses and Other Prepaid Expenses | $20,000 – $165,000 | As Agreed | As Incurred | Landlord or Other Providers |
| Insurance Cost | $15,000 – $35,000 | As Agreed | As Incurred | Third Parties |
| Total Estimated Initial Investment | $1,887,500 – $3,693,000 $556,500 – $1,135,000 $329,500 – $647,500 | If you pay cash for Land, Building, Site Improvements, Equipment, Signage, and Technology. If you finance the Land, Building, Site Improvements, Equipment, Signage, and Technology. If you lease the Land, Building, Site Improvements, and finance the Equipment, Signage and Technology. | ||
Wendy’s Franchise Requirements
To open a Wendy’s franchise you must have a minimum net worth of $1 million and have at least $500,000 in liquid assets. Additionally, given the demand for opening Wendys locations, prior experience is something the company also looks for. They prefer granting franchises to high net-worth individuals with prior food and beverage experience primarily in fast food. Wendy’s also promotes vulnerable minority groups and women to apply to open a franchise.
Wendy’s On-Going Fees
- Royalty Fee: 4%
- National Marketing Fee: 4%
- Local Marketing Fee: 0.5%
- Technology Fee $6,500-$12,000 per restaurant each year
- In-App Delivery Account Statement Services: 3.5% of in-app purchases
How much does a Wendy’s Franchise Make
| Company Restaurants | Franchise Restaurants | |
|---|---|---|
| Number of Restaurants | 393 | 5,190 |
|
Average Annual Gross Sales Median (Min – Max) |
$2,105,786 $2,072,255 ($893,377 to $4,183,704) | $1,892,827 $1,791,231 ($285,004 to $5,636,894) |
| Number of Restaurants at or Above Average (% of Restaurants) | 186 (47,3%) |
2,247 (43,3%) |
Wendy’s franchise restaurants make about $1.9 million in sales!
Based on Wendy’s 393 corporate-owned restaurants we are able to provide an estimate of how much a franchisee can expect to earn per location. The average revenues and margins the median gross profit percentage is 67%. The median gross sales are $2,147,824 and the median cost of sales is $691,594.
This means that a franchisee can expect to earn a gross profit of more than $1.4 million as franchises typically make a little less than corporate-owned restaurants. Finally, the median EBITDA after rent is $379,285 for a corporate-owned restaurant. A Wendy’s franchisee should expect to make around $300,000 for a typical Wendy’s location after accounting for royalty payments.
This means that depending on the financing method chosen to open a location a franchisee can expect to recoup their initial investment in anywhere from 2-10 years largely depending on how the store was financed.
| Traditional Company Owned Restaurants – P&L Breakout | |||
|---|---|---|---|
| Average Amount Median (Min to Max) | % of Average Revenues Median (Min to Max) | Number of Restaurants at or Above Average (% Above Average) | |
| Gross Sales | $2,203,267 $2,147,824 ($1,158,899 to $4,192,494) | 100% 100% 100% | 132 44.9% |
| Cost of Sales | $705,542 $691,594 | 32.0% 32,1% (28.2% to 36.6%) | 137
46.6% |
| Gross Profit | $1,497,725 ($737,712 to $2,916,124) | 68.0% 67.9% (63.4% to 71.8%) | 132 44.9% |
| Other Operating Expenses | $1,054,828 $1,025,930 ($752,876 to $1,821,281) | 47.9% 47.7% (35.0% to 69.0%) | 121 41.2% |
| Restaurant EBITDA before Rent | $442,898 $430,295 (-$72,157 to $1,458,069) | 20.1% 20.2% (-5.4% to 36.1%) | 140 47.6% |
| Rent | $48,041 $7,179 (-$073,045 to $234,503) | 2.2% 0.3% (-2.6% to 12.9%) | 129 43.9% |
| Restaurant EBITDA after Rent | $394,856 $379,285 (-$200,188 to $1,458,069) | 17.9% 17.7% (-17.3% to 36.1%) | 143 48.6% |
| Additional Operating Expenses for Franchised Restaurant | |||
| Royalty (4% of Gross Sales) | $88,131 | N/A | N/A |
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 5,457 | 5,495 | +38 |
| 2020 | 5,495 | 5,520 | +25 | |
| 2021 | 5,520 | 5,535 | +15 | |
| Company-Owned | 2019 | 353 | 357 | +4 |
| 2020 | 357 | 361 | +4 | |
| 2021 | 361 | 403 | +42 | |
| Total Outlets | 2019 | 5,810 | 5,852 | +42 |
| 2020 | 5,852 | 5,881 | +29 | |
| 2021 | 5,881 | 5,938 | +57 |
Conclusion
Based on the median profits and upfront investment of opening a Wendy’s franchise it is an excellent opportunity. Wendy’s franchise owner’s salary & compensation is about $300,000 per year. The national brand recognition Wendy’s has to offer and franchisees being able to recoup their initial investment within a couple of years make it a great opportunity.
That said, it is extremely competitive to be able to open a franchise even if you meet the capital requirements. Wendy’s has very specific criteria they look for when granting licensing agreements most notably significant experience operating fast-food chains in the food and service industry.
