Do you plan to open a 7 Leaves Café franchise but don’t know what to expect and whether it is a good investment? 7 Leaves Café is a mid-sized franchised business operating in the United States with a special menu, and it might seem like an attractive franchise.
In this article, we will go over 7 Leaves Café, its franchise system, the expected costs, and any other things about its franchise system. We will try to help you to see whether 7 Leaves Café is a good business to own or not.
About 7 Leaves And 7 Leaves History
7 Leaves Café is an American quick-service café franchise with a coffee and tea-based menu. They specialize in Vietnamese drinks and macarons. They also offer premium drinks, snacks, and beverages with most ingredients used in the products pressed by hand.
2017 was the start of the 7 Leaves Cafe, and then it started to franchise in the same year. They are currently franchising.
Their franchise system is quite strong, and it offers an opportunity for entrepreneurs to invest in a proven and profitable franchise system.
7 Leave’s support system is designated to help achieve continuous growth and grow the businesses. The company operates 41 active outlets.
Franchise Model Table
| Cost Or Fees | Amount |
|---|---|
| Initial Investment | $244,000-$490,000 |
| Franchise | YES |
| Franchising Since | 2017 |
| Franchise-Fee | $35,000 |
| Royalty-Fee | 6% |
| Liquidity | $1 million |
| Estimated Outlets | 41 |
How Much Does It Cost To Open A 7 Leaves Franchise?
The total average cost to open a 7 Leaves Café franchise is between $244,000 and $490,000, as stated in their franchise disclosure document. This number is the average of the other franchisees that have already spent a certain amount and the expectations from 7 Leaves Café. It includes all kinds of startup costs, including the $35,000 franchise fee.
Depending on the size and location of the outlet, the initial investment might be outside of these numbers. Consulting with 7 Leaves Café about the required equipment might give you a better estimation.
Franchise Requirements
For 7 Leaves Café franchisees, the company is seeking previous experience in the food or retail industry. This is mostly obligatory, and you must have some sort of experience, whether as a manager or as a normal employee.
The franchisee must be social and client-facing and have management skills that they can prove as another requirement.
On the financial side, the franchisees must possess a net worth of at least $2 million and liquid cash of a minimum of $1 million. You must have these amounts apart from the financing you will get for the store.
Profit & Revenue Of 7 Leaves Cafe
The company doesn’t provide any kind of information about the individual financial gains of the franchised stores. That’s why we don’t know how much an average franchised store makes.
According to the company’s financial statements, 7 Leaves Café had a total revenue of $668,000 for the fiscal year 2020. In the same year, when all the expenses were removed, the company had a net loss of $261,000 in 2020.
Failure Rate Of 7 Leaves Cafe
Franchised Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2018 | 0 | 1 | +1 |
| 2019 | 1 | 7 | +6 |
| 2020 | 7 | 9 | +2 |
For the Franchised outlets:
- In 2018, the growth rate was (1)/0×100≈can’t be divided by zero
- In 2019, the growth rate was (6)/1×100≈600%
- In 2020, the growth rate was (2)/7×100≈28.5%
Company-Owned Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2018 | 11 | 15 | +4 |
| 2019 | 15 | 20 | +5 |
| 2020 | 20 | 23 | +3 |
For the Company-Owned outlets:
- In 2018, the growth rate was (4)/11×100≈36.3%
- In 2019, the growth rate was (5)/15×100≈33.3%
- In 2020, the growth rate was (3)/20×100≈15%
Total Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2018 | 11 | 16 | +5 |
| 2019 | 16 | 26 | +11 |
| 2020 | 26 | 32 | +6 |
For Total outlets:
- In 2018, the growth rate was (5)/11×100≈45.4%
- In 2019, the growth rate was (11)/16×100≈68.7%
- In 2020, the growth rate was (6)/26×100≈23.07%
According to the above-mentioned data, there is no failure rate for franchised outlets as the outlets at the end of the year increased during the span of 3 years.
We can see that the franchised outlets for 7 Leaves Cafe grew from 2018 to 2020, showing a growth rate between 600% and 28.5%.
On the other hand, for company-owned outlets, the growth rate of 7 Leaves Cafe was lying in the range between 36.3% and 33.3% for the same period of time.
Overall, when we combine the data of franchise and company-owned outlets, we can see that the 7 Leaves Cafe franchise has expanded in the years 2018-2020 showing a total growth rate between 45.4% and 23.07%.
Payback Period Of 7 Leaves Cafe Franchise
With an investment of $490,000 and an estimated 10% profit margin on the average revenue, the yearly profit would be $66,800.
So, to find out how long it will take to earn back the initial investment:
Payback Period = Investment / Yearly Profit = $490,000/ $66,800= 7.3 years
Based on these figures, it will take approximately 8 years to pay back the initial investment for 7 Leaves Cafe. This time period could be longer or shorter depending on your sales, revenue, and profit figures.
Training and Support Of 7 Leaves Cafe
There is a comprehensive initial training program that includes both classroom and on-the-job training. The first level of early training includes 8 hours of classroom and 6 hours of on-the-job training, which happens at 7 Leave’s corporate training facility.
Then, there is a hands-on, comprehensive training, which has 40 hours of classroom and 126 hours of on-the-job training.
7 Leaves also provides support both before and after the opening of your store. Before you open your store, they review your real estate plans, provide designs, create a grand opening program, help with your marketing campaigns, and so on.
After you open your store, they might make occasional visits and give training.
Terms of Agreement and Renewal
The initial term of the franchise agreement is for ten years. A renewal is possible if both sides agree to it, the franchisee complies with all the rules, and the franchisor approves it.
The renewal is for an additional term of five years, and a renewal fee is applicable. The fee is half of the franchise fee of the first agreement.
Obligations and Restrictions
The franchisee is obligated to spend at least $10,000 on a grand opening marketing campaign before your store starts operations. All the products and services sold at a 7 Leaves Café franchised outlet must follow the company’s specifications strictly as specified in the manual.
Additionally, all the products, services, equipment, and store items must be bought from an approved vendor.
The site of the 7 Leaves Café must be approved by the franchisor, and all the branded products in the store must be bought from either the franchisor or an approved third-party vendor.
Also, you cannot sell any product or service that is not approved by the franchisor beforehand.
Financial Assistance
7 Leaves does not offer direct or indirect financial assistance of any kind. All the financial obligations are on the franchisee’s shoulders, and 7 Leaves does not guarantee any kind of note, lease, or financial obligation.
If opening a cafe franchise appeals to you, consider Starbucks, Whole Foods, and Tropical Smoothie Café as viable options.
7 Leaves Comparison
| Name | Franchise Fee | Royalty Fee | Initial Investment |
|---|---|---|---|
| Gong Cha | $41,500 | 6% | $177,430-$335,400 |
| Kung Fu Tea | $37,000 | 3% | $123,000-$422,000 |
| 7 Leaves Café | $35,000 | 6% | $244,000-$490,000 |
Conclusion
7 Leaves Café is not a major franchise business. However, it still has good brand awareness that could offer good profit for franchise owners. The entry costs are quite moderate, and they provide extensive support for the franchisees to succeed from day one.
There is no information on how much the stores make on average and the company didn’t make any net profit according to the latest financial report.
These show that it might be a risky opportunity, but if you think you can utilize the brand name and manage the store well to earn a profit, they will give you all the support you need for that.
FAQs
How much is the 7 Leaves Franchise?
The total expected cost to open 7 Leaves is between $244,000 and $490,000.
Who is the owner of 7 Leaves Café?
The majority of owners are the Nguyen family, including Vinh Nguyen, and the Artisan company, in collaboration with Crema Bakery.
What is the 7 Leaves franchise fee?
7 Leaves franchise fee is $35,000 per store.
Where is 7 Leaves headquartered?
7 Leaves Cafe is headquartered in Garden Groves, California, United States.
How many locations does 7 Leaves Cafe has?
There are currently 41 outlets of 7 Leaves Cafe and most of them are franchised.
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