Meal Assembly Watch

Although this is talking about a Quiznos the items listed are probably applicable to most meal assembly stores. The information is from a couple of years back, but the category breakdown is interesting includes some cost we probably forget to take into account when figuring out the cost of a store.

Close? Not even in the ballpark?

If a store earns $40,000 / month:
7% Royalty	$ 2,800
1% Local Advertising	$ 400
3% national advertising	$ 1,200
20% Labor	$ 8,000
29% Food	$ 11,600
3% Paper	$ 1,200
.3% Accounting/Payroll	$ 300
10% Rent/CAM	$ 4,000
2.75% Insurance / Misc.	$ 1,100
5% repay SBA loan	$ 2,000
4.5% misc bills (utilities, etc)	$ 1,800
.5% Spoilage	$ 200
1% Supplies	$ 400
1% Promo Food	$ 400
1% Comp Food	$ 400
2.9% Credit Card Fee	$ 1,160
.4% Coupons	$ 160
.5% Food Waste	$ 200

No one has any control over %. They are fixed and that is that. So if a store is lucky enough to earn $480,000 annual, the owner can expect to walk away with a profit of 9.4% = $45,120 [edit by Ryan Knoll: I believe this should be 7.15% = $34,320 based on the numbers provided]. No one is going get rich off of that. Of course if an owner can get cheaper rent, and increase sales, it will be of great benefit.

The average store seems to be about 1,500 – 1800 sq ft. and the going rate is $17.50 – $30.00 sq ft + $5.50 – $8.00 CAM.

That looks reasonable to me and should be considered by anyone buying an existing or new franchise. People often forget the expense of promos and coupons, credit card fees, insurance, and payroll expenses. The pretty picture the franchise sales rep paints for you often is the “best case” scenario.

Well, you might think, “That’s a 18% return on my investment of $250,000! I’ll take it!”. That’s not an accurate reflection of your actual return. Those results assume you are working at the franchise full-time and do not include your or your manager’s salary. So, if you think your year’s effort is fairly compensated at $45,000, then your real return on your investment is ZERO (actually it’s negative because you could be making 4-5% in bonds).

What a Quiznos franchisee makes

Other Articles of Interest:

• Food & Beverage – Do You Know Your Break Even Point?
• Burger King Franchise Owner Says Value Menu Sapped Profits
• Regulators Seize IndyMac
• Restaurants Get a Taste of Economic Downturn
• Dream Dinners CEO Focused on Business Model, Not Litigation
• Why is meal assembly not treated like a business?
• The 3 worst money moves you can make
• Spam: Sales rise as consumers trim food costs
• Burger King Shares Continue Rise After Co. Reports Strong 2nd-Quarter Sales
• Mr. Food discusses his meal assembly philosophy