Fatburger is one of the most popular fast-food chains offering delicious hamburgers with an established franchise system. Compared to their competitors, the company’s initial entry costs are moderate and could seem like a great opportunity. You might be wondering if it’s worth owning a Fatburger since the costs are relatively moderate.
Whether it’s worth it or not depends on individual expectations and choices. However, in this article, we will give you a general understanding of Fatburger and its franchise system.
We will talk about associated costs, support, training, and everything else that you can expect when you buy a Fatburger franchise.
About Fatburger And Fatburger History
Fatburger is a privately owned American fast casual restaurant chain specializing in thick and juicy hamburgers. The company focuses on providing beef burgers that are grilled to order and also offers chicken sandwiches, turkey burgers, chili dogs, fries, onion rings, and milkshakes.
The founder, Lovie Yancey, created the company with the goal of serving delicious, juicy, made-to-order, and tasty hamburgers.
The company was founded in 1952 and started franchising in 1990. With over 70 decades of experience in the industry, the company holds a massive reputation for its amazing hamburgers. Currently, the company has over 200 locations, and most of them are franchised.
Franchise Model Table
| Cost Or Fees | Amount |
|---|---|
| Initial Investment | $463,169-$1.6 million |
| Franchise | YES |
| Franchising Since | 1990 |
| Franchise-Fee | $50,000 |
| Royalty-Fee | 6% |
| Liquidity | $500,000 |
| Estimated Outlets | 205 |
How Much Does It Cost To Open A Fatburger Franchise?
The total average cost to open a Fatburger varies between $463,169 and $1.6 million. This cost includes all kinds of expected startup costs like the $50,000 franchise fee, inventory, construction, lease, deposit, and many other things.
The franchisor provides you with guidance on what to purchase and where to purchase them.
The expected average cost mentioned above comes from Fatburger itself, and they came up with it by taking an average of how much the existing franchisees spend on startup costs. Your exact costs will vary depending on location, size, and other factors.
Franchise Requirements
Fatburger requires the franchisees to have a minimum net worth of $1.5 million and a minimum of $500,000 in liquidity.
They don’t specifically look for people who have experience in the industry or have business management experience, but they look for specific personality traits that would help you manage your store better.
These things include the ability to manage a community, leadership skills, a customer-focused approach, a solid credit background, and excellent professional and financial references.
Profit & Revenue Of Fatburger
Fatburger’s revenue as a company in 2022 was $8.1 million. Once all the expenses and other costs were removed from the total revenue, the company didn’t make any net profit for the year 2022. They had a net loss of $796,328. This is for the fiscal year 2022 from their Franchise Disclosure Document.
Overall Sales
According to Fatburger’s latest Franchise Disclosure Document, the average overall net sales per franchised store was $1.2 million. The maximum overall sales per store was $2.5 million, and the lowest was $445,089. These numbers are from locations that were open at least 12 months prior to the report’s date.
Payback Period Of Fatburger
With an investment of $1,600,000 and an estimated 15% profit on the average revenue, the yearly profit would be $1,215,000.
So, to find out how long it will take to earn back the initial investment:
Payback Period = Investment / Yearly Profit = $1,600,000 / $1,215,000= 1.31 years
Based on these figures, it will take approximately 2 years to pay back the initial investment for Fatburger. This time period could be longer or shorter depending on your sales, revenue, and profit figures.
Failure Rate Of Fatburger
Franchised Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 166 | 179 | +13 |
| 2021 | 179 | 188 | +9 |
| 2022 | 188 | 193 | +5 |
For the Franchised outlets:
- In 2020, the growth rate was (13)/166×100≈7.83%
- In 2021, the growth rate was (9)/179×100≈5.02%
- In 2022, the growth rate was (5)/188×100≈2.65%
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 Fatburger grew from 2020 to 2022, showing a growth rate between 7.83% and 2.65%.
Training and Support Of Fatburger
There is an initial training program for the proposed primary operators of the franchised restaurant, either the franchisee and the designated manager or just the franchisee. The initial Fatburger Training course lasts for 4 to 6 weeks. The franchisee, principal owner, must separately participate in a 2-week long executive training program.
The Fatburger team also provides you with ongoing support from inventory purchasing from approved suppliers to marketing. From pre-opening to post-opening, there will be continuous support systems available for franchisees.
Terms of Agreement and Renewal
The initial Fatburger franchise agreement is for 15 years. After the initial 15 years, a renewal agreement is possible if both sides agree to it and the franchisor approves the renewal. There might be a renewal fee depending on the conditions of your agreement.
Obligations and Restrictions
The franchisee is obligated to use a real estate broker selected or approved by Fatburger when choosing the site for the outlet. All or most digital parts that are going to be used in the store must be purchased from an approved vendor that the franchisor chooses.
Fatburger has designated suppliers for certain products, and you must buy those products from these designated suppliers.
The franchisor could designate some merchandise or menu items to be sold at your location from time to time, and you are obligated to sell them at your store. You are restricted from selling any other merchandise or products that the franchisor doesn’t approve of.
You are also restricted from buying products or services from suppliers that are not designated or approved by the franchisor.
Financial Assistance
Fatburger doesn’t provide direct financial assistance, but they provide indirect assistance via the relationships they have with 3rd party lenders. These lenders offer financing for restaurant franchises on various things. Each situation is different, and the exact assistance you receive will depend on your individual situation.
Potential franchisees interested in fast food franchises can investigate opportunities with the Steak ‘N Shake franchise, Shake Shack Franchise, Slim Chickens Franchise, Quizno’s Franchise, and Culver’s Franchise.
Fatburger Comparison
| Name | Franchise Fee | Royalty Fee | Initial Investment |
|---|---|---|---|
| Smashburger | $40,000 | 5.5 | $1.3 million-$2.3 million |
| Five Guys | $25,000 | 6% | $256,200-$591,250 |
| Fatburger | $50,000 | 6% | $463,169-$1.6 million |
Conclusion
Fatburger has a good franchise system, moderate opening costs, and an exceptional franchise support system to help entrepreneurs succeed and make money from their stores. However, there is a lot of competition in this industry, and it’s quite easy to lose your investment due to the competition in your area.
If you think that your area doesn’t have a lot of competition, you have enough cash to open a store, and the expected revenue matches your goals, then it might be a good idea to consider a Fatburger franchise.
FAQs
How much does it cost to franchise Fatburger?
The initial estimated investment to franchise Fatburger is between $463,169 and $1.6 million. This includes the $50,000 franchise fee and all other startup costs.
What is the net worth requirement for Fatburger?
The net worth requirement for a Fatburger franchise is a minimum of $1.5 million with a liquidity of at least $500,000.
Who owns Fatburger?
FAT Brands and Fog Cutter Capital Group, Inc. are the owners of the Fatburger brand altogether.
Who founded Fatburger?
Fatburger was founded by Lovie Yancy in 1947.
How many locations does Fatburger has?
Fatburger operates around 150 Fatburger restaurants worldwide. The restaurant is also planning to open 300 more locations in the future.
Where is Fatburger headquartered?
The headquarters of Fatburger is located in Beverly Hills, California, United States.
Sources
https://www.fatburgerfranchise.com/faq
https://www.fatburgerfranchise.com/ideal-candidate-1