How Much Money Dunkin’ Donuts Franchise Owners Make – Dunkin’ Donuts Franchise Cost

How Much Money Dunkin’ Donuts Franchise Owners Make – Dunkin’ Donuts Franchise Cost

Dunkin’ Donuts Franchise Cost

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The story of Dunkin’ Donuts began in 1948 with a donut and coffee restaurant in Quincy, Massachusettes called “Open Kettle”. Founder William Rosenberg served donuts for five cents and a premium cup of coffee for ten cents. After a brainstorming session in the company, it was renamed Dunkin’ Donuts in 1950. The goal was simple, to make and serve the freshest, most delicious coffee and donuts quickly and courteously in modern, well-merchandised stores.

Five years after the name change, Dunkin’ Donuts began franchising stores and quickly grew to 100 stores within ten years. Since 1950, the number of Dunkin’ stores has expanded to greater than 12,000 stores worldwide, with locations in 45 countries.

The company serves approximately 1.9 billion cups of hot and iced coffee per year and hopes to double its US presence to land at a total of 17,000 restaurants worldwide. Franchising is a big part of that growth story.

So you are ready to take a look at franchising a Dunkin’ Donuts business but wondering what it costs? We reviewed the franchise disclosure document (FDD) for Dunkin’ and found that the average freestanding store costs and initial investment of between $245,000 – $1,717,103, including a franchise fee of $40,000 and excluding real estate costs.

Now that you have put out the initial investment for a new Dunkin’ franchise location, how much money can you expect to make? The average freestanding restaurant sales for 2017 were $1,299,922 for stores with a drive-thru and $1,041,001 for stores without a drive-thru. On that $1.0M to $1.3M, average profitability was 22.7% EBITDAR and likely 17% EBITDA. That equates to roughly $175,000 – $200,000 in profits per location.

So is that a good return on your investment for a Dunkin’ franchise? At $200,000 in profits and $1,000,000 in building costs, that is roughly a 20% return on investment. Food costs are somewhat lower for donuts and coffee than a typical menu, often with food costs in the range of 20-25% vs. 30% for other eateries.

Is a 20% return a good return on your capital investment? That’s up to you decide. If you have $1,000,000 in your pocket and alternative investments return less than 20% then you may want to look into a Dunkin’ franchise investment.

The initial franchise fee ranges from $40,000-$9,000. This franchise fee covers the initial franchise term of 20 years. The franchise fee at Dunkin’ differs a little from the typical flat cost franchise fee. Dunkin’ charges different fees based on geography. Typically, new units outside the Northeast will be towards the lower end.

Here is how the $245,000 – $1,717,103 initial investment breaks down:

Initial Franchise Fee: $40,000-$90,000 (20 year term)
Building Costs: $90,000-$588,653
Site Development Costs: $3,900-295,500
Additional Development Costs: $4,700-$150,000
Equipment, fixtures and Signs: $54,000-$269,250
Electronic Cash Register / Retail technology: $24,700-$61,000
Opening Inventory: $8,000-$20,000
Misc. Opening Costs: $9,500-$70,000
Licenses, Permits, Fees & Deposits $3,500-$5,500
Uniforms: $400-$1,200
Insurance: $4,500-$16,000
Travel and Living Exp while training: $2,000-$35,000
Marketing Start Up: $0-$10,000
Additional Funds for First 3 Months of Operations: $0-$105,000
Total: $245,200-$1.717,103

Maybe you can find the money to build a new Dunkin’, but along with that Dunkin’ is also going to check out your net worth. The current net worth requirement to become a Dunkin’ franchisee is a liquidity requirement of $125,000 with net worth of $250,000.

Further, here are what the financials look like below the top line:

Ongoing franchise fee: 5.9% of gross sales
Continuing Advertising fee: 5.0% of gross sales
Average Cost of Goods: 26.8%
Average Labor Cost: 27.6%