There’s a new Raising Cane’s Chicken Fingers being built in our area, I don’t know if it purchased the land on which it sits, but the construction is pretty significant. Notwithstanding the cost of the land (ownership or a lease), the construction itself has to be in the millions of dollars, maybe 5-10. I don’t know how profitable these restaurants can be, but it’s got to take quite a few years of selling chicken fingers just to recoup the cash outlay as well as the operating expense, to say nothing of being profitable. Can anyone with insight into the business side of the restaurant business offer any insight?
IANA accountant but I believe one consideration are paper expenses like depreciation.
Five minutes of googling suggests that the cost of a new Lee’s Famous Chicken franchise, including new building and inventory, runs between $550k and $2,350,000.
The site (cite), says that Raising Cain’s doesn’t offer franchises, but indicated that Lee’s would likely be a valid comparison. I can’t vouch for the accuracy. The site also offers info on average profitability.
I assume your question isn’t specifically about that restaurant, right? Your questions apply to virtually every business.
WRT Raising Cain’s Chicken Fingers, however, according to wiki they’re doing well north of a billion dollars a year. Presumably that gives them plenty of leftover cash to build out new stores. And, since it’s a chain, it’s not some local individual trying to do this out of their own pocket. That would allow the individual store plenty of time to show a profit.
From Forbes, “The chain—which ranked as the 22nd-biggest by revenue on last year’s annual QSR 50 report—rang in $5.7 million in sales per location on average.”
BTW, regarding the land ownership, the model McDonalds established is that the parent company owns the land and buildings in which many of its restaurants are located, leasing them to the franchisee.
Gross or net? (Edit: ‘rang in’ would suggest gross. That’s nothing to sneeze at, but we don’t know what their margin is.)
It should be noted, at least for the purposes of this thread, Raising Cain’s Chicken Fingers is a chain, not a franchise, so all the locations are owned by the same entity. There’s no individual franchise owners in this set up.
Thanks for that. BTW, I think the speculation in the OP that a Raising Cane’s restaurant might cost five to ten million to build out is high. I think it’s much less than that.
Also, I think @JohnT knows something about the franchise business and might be able to answer the OP’s questions more authoritatively.
Since it’s a private business, the numbers are all over the place. This article says 3.1 million.
I believe they got that number from these building permits:
26,000 Jax EPICS
2,000,000 Jax EPICS
42,550 Jax EPICS
1,040,000 Jax EPICS
[Checks math], yup, that’s $3,108,550
A Buc-ee’s is being built about 20 miles south of where I live. I drive by it when going to and from work. (You can look it up. It’s in New Carlisle / Park Layne / Huber Heights, Ohio, just north of I-70.) The amount of construction is nothing short of amazing. Read it’s going to take two years to finish. The budget must be deep into seven figures. I’m sorry, but there’s no way they can make enough money on brisket or whatever to pay for it all. It doesn’t make sense.
I found one site that said that Buc-ee’s stores have sales of $50-100 million per store.
Eight…Eight figures. 47,200,000
Let’s use that. And pretend to be investors buying shares in the real estate partnership. I’d expect it to be an annual return of 7% ish with a long term lease and inflation adjusted.
Can a location with $5.7 M in gross sales, maybe $1.7 M net, (I read elsewhere they net at about 30%) afford to spend roughly $217K on rent? Seems likely.
This site says under $3M. Looks like one of those ai blog site results. No idea if its valid
No it doesn’t. That’s for “a fast-casual restaurant”. Any website that refers to it as a ‘franchise’ is likely making up numbers.
In fact, there’s multiple disclaimers throughout that article stating there’s no official numbers for Raising Cane’s.
Obviously, there’s some way that they make money, because they’re growing and presumably profitable.
As @Dewey_Finn noted, educated guesses (I say that, because Buc-ee’s is privately held, so they don’t have to publicly release financials) are that one of their stores grosses $50 million to $100 million a year.
Each store is absolutely enormous – they have 100+ gas pumps, and a huge amount of stuff for sale inside, and they generate enormous numbers of visitors: I see various estimates that a Buc-ee’s location gets 3 to 5 million unique visitors per year. They’ve become tourist attractions, and travelers will go out of their way for a chance to stop at one.
It’s going to be highly location dependent. Construction costs in the Northeast, SoCal and NorCal will be much much higher than in most of the South, Midwest and Mountain West.
I mean like the same spec store in Adeline TX might be $10M and in Basking Ridge NJ $25M. And that does not include the land where the costs are even more wildly different.
I’ll admit that I stopped at a Buc-ee’s when I was in Brazoria County, Texas (south of Houston) a year ago or so. I had no particular reason to be there except to experience the store. And yet I never visited the restroom. (They’re famous for their large, clean restrooms.)
Buc-ee’s is a phenomenon unlike any other in that space.
Aldo gas stations are incredibly costly to build nowadays. But they drive huge amounts of traffic. $100M a year for a Buc-ee’s would be incredible.
The parent company of Circle K, takes in about $5M per company owned location, 75% of which is gasoline at a very low margin. Their gross margin dollars is less than $1M per store, and Operating Margin under $300k (excluding depreciation). That would probably float an investment of $2M, maybe $2.5M.
I wouldn’t be surprised if the average Buc-ee’s did five times the sales of an average Circle-K. Maybe even ten times. But it would have to be 20 times to get to $100M. Thats not impossible, but seems unlikely to me. Even for just one exceptional location. Thats more than the average IKEA store. More than the average BJ’s store.
We have a brand new Raising Cane’s nearby. The county assesses the land value at $1.7 million and building value at $922,000. It sits next door to an Applebees which has been there at least 20 years. That value is $1.5 million (land) and $957,000 (building).
a $3M land and building, if financed by a loan, would require how much to stay afloat? Say 6% interest (probably lower) implies $15,000 a month. A good fast food place in a good location should do what, about $15,000 a week? (The McD’s where my wife worked was out in the sticks, and still did $10,000 on a good weekend day 25 years ago - but that’s McD’s.) So $60,000-plus a month gross sales and they’re not paying someone else for the name and branding, advertising, marked up supplies, etc. the way a franchisee does. How much more does corporate advertising really cost when you add another outlet in an already serviced market?
I see it being profitable. I assume the chain can make a good guess as to their likely sales in the area.
For a $10,000 day means average $1,000 hours - say a typical bill is about $20 (fast food for 2 or more no be cheap today) that’s about 50 customers. I would hope a profitable fast food chain on a busy day does more than one customer a minute, evening out the closing hour where maybe a dozen or two show up.
Last few times I was in the USA and went to Chik-fil-A drivethru was 2 lanes lined up around the parking lot. Some restaurants do really well.