Earn More MoneySeptember 6, 2021October 25, 2021

How Profitable Is A Wendy’s Franchise?

In terms of franchising, Wendy’s proves to be an extremely popular choice among many people. This is especially true when it comes to celebrities. However, why is this the case? Well, there are a few reasons as to why one would want to own a Wendy’s franchise. The first is that it can be a reliable way to earn an income once your investment pays off. The second reason is that Wendy’s is known to be a franchise that earns its money initial investment back more often than not. Therefore, many people look to invest in a Wendy’s franchise.

Some notable people who own Wendy’s franchises are Rick Ross, Peyton Manning, Shaquille O’Neal, and Junior Bridges who at one point owned over 100 franchises. Of course, it is easy for celebrities to purchase one and earn a lot of money. They are already wealthy and will most likely have the initial funds. Furthermore, they will have enough money and connections to get prime locations. Therefore, the results may vary. However, we will take a look at how you can obtain a franchise, the fees that are associated with owning one, and how much you can potentially earn.

How To Obtain A Wendy’s Franchise

Acquiring a Wendy’s franchise is relatively similar to any other franchise. Essentially, you must go through an application process. This process can take quite some time. However, when applying, Wendy’s looks at a plethora of criteria to see if you’re a good candidate to represent their brand. First and foremost, Wendy’s looks for people who have extensive experience within the fast-food industry. This is illustrated on their website.

This means they will most likely require years of experience. However, you are most likely going to need experience in all facets of the fast-food industry. That means experiencing and learning different roles. As the owner of a franchise, it is critical that you know how to perform every single job. This will ensure that you know what to look for, how to train staff, rectify issues when they arise, and take over when needed.

Above are some of the qualifications that Wendy’s looks for in its potential candidates. This includes capital for reinvesting, being committed to the business, and most of all, learning the business model. While many of these are traits you should have, it all comes down to your experience and the amount of capital you have when applying.

What Are The Fees?

When it comes to fees, there is a lot that needs to be accounted for. This is for both the initial investment and the long-term fees that are associated with owning a franchise. However, before we take a look at the varying types of fees, it is important to note that there are different types of establishments. For example, there are the typical free-standing Wendy’s you’ll see on a street corner.

However, there are many non-traditional establishments that carry different fees. An example of a non-traditional franchise location would be the ones located in a mall. Another example would be Wendy’s which is located in gas stations and on-route stops. Since these locations are smaller by nature, they will typically have fewer expenses.

Above are the costs associated with owning a franchise. This can be found on the company’s website. First, Wendy’s explains that they need a minimum net worth. This is either $5,000,000 USD or $2,000,000 Canadian. This is quite a considerable amount of money. However, it is to be expected as they are known to be good investments and are a nationally recognized brand. What may be slightly more difficult to obtain is the liquid assets. Wendy’s requires $1,000,000 – $2,000,000 in liquid assets in order to be eligible for their franchise.

Fees

Under that, Wendy’s illustrates their fees. First is the application fee, which is relatively cheap when compared to places like Burger King and McDonald’s. The bulk of the initial investment will go towards the technical assistance fee, which is $50,000 for a 20-year term. This is higher than other franchising/technical assistance fees.

Next are the percentage fees that have to do with royalties and advertising. Royalties will cost you approximately 4% of your gross sales. After that is the national advertising fee which comes in at 3.5%. Lastly is the local advertising. This will cost you 0.5% of your gross sales. Altogether, this will come up to an 8% fee, which is still cheaper than franchises like Subway.

Lastly, are the ongoing fees. This includes inventory and maintenance.

How Much Can You Earn?

The earnings of a Wendy’s franchise can greatly vary. This is due to a few factors. These factors include size, location, demographics, and timing. However, if we take a look at a few statistics, we will see how much a Wendy’s franchise earns.

Wendy’s is in the upper echelons of the fast-food industry in terms of sales. While not being as high as places like McDonald’s, they still accumulate a healthy number of sales. The average gross sales for a Wendy’s franchise is just over $1,600,000. However, there is quite a large range. Some franchises earn as low as $400,000 a year in sales. However, there are franchises that are able to earn well over $4,000,000 per year.

Now, for franchises, you as the owner will take the percentage that is left over after your expenses, the profit. However, what many franchisees do is provide bonuses to the employees based on their performance. An incentive if you will. For the sake of this article, let’s assume that you acquire a Wendy’s franchise and it earns the average amount of $1,600,000 per year. However, your restaurant operates at a 5% annual profit margin. This means at the end of the year, you can see an income of $80,000 per year. This is a large sum of money. However, most franchisees will take a large portion of the money they get and use it to pay off the debt they’ve taken on.

However, there is always the opportunity to earn more money. This can be done by mitigating costs. This means saving money on labour, reducing waste and maximizing efficiency to garner as many sales as possible. If you can minimize waste while maximizing sales, you will see an increase in the profit margin. Let’s say you maximize efficiency and bring your 5% profit margin to 8% annually. This means you’ll be able to take home $128,000 per year. The plus-side is that the faster you pay off any debt you’ve taken on, the more financially stable you’ll become as you won’t personally be operating in the red.

Conclude

To conclude, a Wendy’s franchise can be expensive. However, they have been proven to be a great asset to have. Their return on investment has been solid and will continue to be. While you can earn a healthy living off one franchise, most franchisees aspire to expand. This means owning more than one Wendy’s franchise. By doing this you can exponentially grow your yearly income, as proven by many celebrities and investors throughout the years.

Shameed Chris Khan

Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.