Freddy’s, renowned for its signature frozen custard and steakburgers, has successfully carved a niche for itself in the highly competitive food industry.
The chain’s offerings imbued with an irresistible Americana charm, have resonated deeply with food enthusiasts across the nation.
With Freddy’s widespread popularity, many entrepreneurial spirits are turning their attention to franchise opportunities. So, what does it take to open a Freddy’s franchise?
In this article, we delve into the intricacies of Freddy’s Franchise – its history, financial commitments, prerequisites, and much more.
About Freddy’s Franchise
Freddy’s is an esteemed American fast-casual restaurant chain with its roots deeply entrenched in Wichita, Kansas.
Esteemed for its diverse menu, Freddy’s delivers an unparalleled culinary experience to its patrons.
The establishment shines for its signature offerings, including Vienna Beef hot dogs, chicken sandwiches, and crispy shoestring fries.
Nevertheless, it is their cooked-to-order steakburgers that truly set them apart in the competitive gastronomic landscape.
History Of Freddy’s
Established in Wichita, Kansas, in 2002, Freddy’s was co-founded by the Simon brothers, Bill and Randy, alongside seasoned restaurateur Scott Redler.
The brand was christened Freddy’s, a tribute to the Simons’ father, upholding values of hospitality, quality, and timeless traditions.
The franchising journey began in December 2004, with the opening of their first franchise in Hutchinson, Kansas.
The chain hit a significant milestone in 2013 when it unveiled its 100th store in Bowling Green, Kentucky, before reaching the 400th mark in Overland Park, Kansas, in 2020.
In 2021, the franchise saw a landmark change as it was acquired by the private equity firm Thompson Street Capital Partner for an undisclosed sum. Today, there are over 470 Freddy’s locations in the United States.
Freddy’s Franchise Model
| Cost Or Fees | Amount |
|---|---|
| Initial Investment | $794,254–$2,523,239 |
| Franchise | YES |
| Franchise Fee | $30,000 |
| Royalty Fee | 4.5% |
| Liquidity | $400,000 |
| Estimated Outlets | 470+ |
How Much Does It Cost To Open A Freddy’s Franchise?
Venturing into the franchise business requires a substantial financial commitment.
However, Freddy’s, like many successful franchises, promises the potential for a gratifying return on investment.
Aspiring Freddy’s franchisees must demonstrate a net worth of at least $1 million and possess minimum liquid assets of $400,000.
Initial investments fluctuate between $794,254 and $2,523,239, a spectrum that encapsulates various costs, including an initial franchise fee of $30,000.
Beyond the upfront investment, the financial commitment extends to ongoing fees, including a 4.5% royalty fee and a 1.5% contribution toward marketing efforts.
Freddy’s Franchise Revenue & Profit
Freddy’s has successfully posted impressive financials, with its latest revenue figures standing at an estimated $474.7 million.
Such stellar performance testifies to the brand’s growing popularity and profitability in the highly competitive food industry.
An average Freddy’s franchise can expect to generate an annual sales figure of around $1,758,000.
This robust turnover is indicative of the promising financial prospects offered by the franchise.
Drilling further down into the financial specifics, each franchise can anticipate an annual owner salary of approximately $158,220 (annual profit).
The estimated profit margin of 9% also highlights the franchise’s robust profitability.
| Financial Overview | Percentage of Revenue | Amount ($) |
|---|---|---|
| Individual Franchise Annual Revenue | 100% | 1758000.00 |
| Rent | 11.38% | (199972.50) |
| Insurance | 5.69% | (99986.25) |
| Salaries | 22.75% | (399945.00) |
| Franchise Royalty Fees | 5.69% | (99986.25) |
| Utilities | 2.27% | (39994.50) |
| Cost of Goods Sold (COGS) | 28.44% | (499931.25) |
| Labor (Variable) | 14.79% | (259964.25) |
| Total (Expenses) | 91.00% | (1599780.00) |
| Net Profit | 9.00% | 158220.00 |
Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.
Freddy’s Franchise Requirements
Freddy’s franchise requirements reflect its commitment to maintaining high-quality offerings and service.
Foremost, franchisees are expected to have at least $400,000 in liquid assets and a minimum net worth of $1 million.
Alongside the monetary prerequisites, Freddy’s franchisees must have previous restaurant experience and a background in multi-unit development.
The brand seeks entrepreneurs who can commit to a minimum 4-unit development agreement, emphasizing a plan for sustained growth.
Freddy’s Franchise Training And Support
At Freddy’s, the franchisees are never left in the lurch. An intensive training program forms the bedrock of the support offered.
This includes 348 hours of on-the-job training and 67 hours in a classroom setting aimed at equipping franchisees with the necessary skills and knowledge.
Freddy’s also provides extensive support in real estate. Their team assists with vital processes, such as site selection, restaurant layout, facility planning, equipment specifications, and ordering.
Payback Period Of Freddy’s Franchise
With the midpoint investment of $1,537,000 and an estimated 9% profit on the average net sales, the yearly profit would be $158,220.
So, to find out how long it will take to earn back the initial investment:
Payback Period = Midpoint Investment / Yearly Profit = $1,537,000 / $158,220 = 9.7 years
Based on these figures, it will take approximately 10 years to pay back the initial investment for Freddy’s. This time period could be longer or shorter depending on your sales, revenue, and profit figures.
Failure Rate Of Freddy’s
Franchised Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 355 | 357 | +22 |
| 2021 | 357 | 391 | +34 |
| 2022 | 391 | 427 | +36 |
For the Franchised outlets:
- In 2020, the growth rate was (22)/355×100≈6.19%
- In 2021, the growth rate was (34)/357×100≈9.52%
- In 2022, the growth rate was (36)/391×100≈9.20%
Company-Owned Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 30 | 33 | +3 |
| 2021 | 33 | 30 | -3 |
| 2022 | 30 | 29 | -1 |
For the Company-Owned outlets:
- In 2020, the growth rate was (3)/30×100≈10%
- In 2021, the failure rate was (3)/33×100≈9.09%
- In 2022, the failure rate was (1)/30×100≈3.33%
Total Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 365 | 390 | +21 |
| 2021 | 390 | 421 | +31 |
| 2022 | 421 | 456 | +35 |
For Total outlets:
- In 2020, the growth rate was (21)/365×100≈5.75%
- In 2021, the growth rate was (31)/390×100≈7.94%
- In 2022, the growth rate was (35)/421×100≈8.31%
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 Freddy’s grew from 2020 to 2022, showing a growth rate between 6.19% and 9.20%.
On the other hand, for company-owned outlets, the failure rate of Freddy’s was lying in the range between 9.09% and 3.33% for the period between 2021-2022. The company started with postive net change, showing a growth rate of 10% in 2020.
Overall, when we combine the data of franchise and company-owned outlets, we can see that Freddy’s franchise has expanded in the years 2020-2022, showing a total growth rate between 5.75% and 8.31%.
Freddy’s Franchise Terms Of Agreement & Renewal
Freddy’s franchise deal is for 15 years. If all of the requirements have been met, the franchisor has the option to extend the agreement by an additional ten years throughout the course of successive renewals.
When negotiating an extension to the agreement, it is important to take into account the company’s revenue and development.
The likelihood of a contract renewal decreases if company growth remains stagnant.
Freddy’s Franchise Obligations And Restrictions
Franchisees of Freddy’s are responsible for running the franchise with all of their energy, time, and money.
Franchisees are not allowed to sell anything that does not comply with the standards established by the franchisor.
Selling to wholesalers is likewise not allowed for franchisees. Franchisees are not allowed to do any kind of online or mail-order sales.
Franchisees are not allowed to sell products through the web, publications, direct mail, or toll-free phone lines.
Freddy’s Franchise Financial Assistance
Freddy’s does not provide any kind of financial assistance to its franchisees, either direct or indirect.
If you’re looking for financing, you should consider other options, such as the Small Business Administration (SBA).
Freddy’s Comparison
| Company | Freddy’s | Buffalo Wild Wings |
|---|---|---|
| Year Founded | 2002 | 1982 |
| Franchise Fee | $30,000 | $25,000 |
| Initial Investment | $794,254–$2,523,239 | $2,480,000–$4,600,000 |
| Number of Outlets | 470+ | 1240+ |
Conclusion
Freddy’s is a throwback to classic Americana, a testament to timeless traditions and quality that resonates deeply with its customers.
Their distinctive menu offerings, coupled with a unique brand ethos, set the stage for a rewarding franchise opportunity.
With impressive financial performance, comprehensive training, and support, investing in Freddy’s franchise could serve as a viable and rewarding entrepreneurial journey.
FAQs
Does Freddy's Franchise Offer Franchising?
Yes, Freddy’s started offering franchising opportunities in 2004.
Who Founded Freddy's Franchise?
Freddy’s was co-founded by the Simon brothers, Bill and Randy, and Scott Redler.
How Many Freddy's Franchise Locations Are There?
There are over 470 Freddy’s franchise locations nationwide.
Is Opening A Freddy's Franchise A Good Investment?
Yes, Freddy’s franchise typically yields a good profit margin and can be a worthwhile investment.
Where is Freddy's headquartered?
The headquarters of Freddy’s Frozen Custard & Steakburgers is located in Wichita, Kansas.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.