question regarding profitabilty of a little ceasars franchis

Hi everyone,
Im looknig at a little ceasears for sale that does around 20k a week in sales.
The pay about 4k in rent.
Is it possible for the store to have a 385k profit?Thats what the owner claims.Seems way too high.
Any feedback would help

Re: question regarding profitabilty of a little ceasars fran

That seems high, store doing a million a year and bottom margins at 30 plus?

I bet that doesnt include any salary or DEBT service.

How much are they asking and where located?

Re: question regarding profitabilty of a little ceasars fran

$20K x 52 weeks = $1,040,000 annual

$385,000 / 1,040,000 = 37% profit

I suggest you get very clear information from him about a few things:

  1. definition of “profit”
  2. what expenses, costs and fees are removed from gross sales to generate his “profit” figure
  3. get a clear idea what his prime costs are: labor, rent, utilities, INCLUDE SALARIES
  4. Make sure you comb through that franchise agreement carefully and review it with an attorney . . . many have beenm snagged by the small print
  5. Ask to see his corporate tax return . . . at least his reported sales and profit numbers
  6. any information you can glean from hmi to confirm that actual sales were, indeed, $20K per week for a year, and not just recently.

Re: question regarding profitabilty of a little ceasars fran

look very close…sales are quite high…we’re talking over 500 pies/day…look at the sales tax #'s paid…

even tho LC makes their own dough & shreds their own cheese the #'s don’t add up

Re: question regarding profitabilty of a little ceasars fran

Patriot,

I worked there years ago and they did shred etc, but last time I was in a corporate store I saw bagged cheese.

I imagine if you ran a tight ship, those numbers are possible minus GM and debt service.

Re: question regarding profitabilty of a little ceasars fran

They are claiming 375k profit.
My definition of profit The gross-all expenses (not including debt service)
They are asking 2x NOI , so about 750K.
Ive seen dunkin donuts go for 5x net so to me this seems like a good deal

Re: question regarding profitabilty of a little ceasars fran

He’s not taking $375K 2 the bank…don’t kid yourself…

LC’s can run some good #'s, but this is anomaly…

Sales are extremely high as well as the the “net”…

Re: question regarding profitabilty of a little ceasars fran

When looking to buy a restaurant, debt service should not be in the discussion. His debt service is irrelevant to the sales price. Should the business sell more to someone who will be paying all cash? Of course not, so ignore people here who tell you to factor that in, they don’t understand the details involved in buying a business.

To answer your question, 37% return on a million dollar place is reasonable. Some here are going to scoff at that simply because they don’t do the math. Most here should be doing 20% or so, but you’re not also doing $1M in sales.

Re: question regarding profitabilty of a little ceasars fran

I would make sure you got POS reports though. I have problems believing the sales numbers. I have never seen a Caesar’s do that kind of volume.

Re: question regarding profitabilty of a little ceasars fran

I used to be a supervisor with LC, and I assure you that 37% profitability is an impossibility. The top stores were hitting 24%, but those were few and far between.

With Hot and ready food costs are 33-35%.
Labor runs at about 22-25%.
Rent is 5%.

Best case 60% with those figures alone
Usual it is 65%

Hitting 37% would mean that all other expenses together are somewhere between zero and $600 a month. The numbers don’t add up at all.

Re: question regarding profitabilty of a little ceasars fran

$4400-5000 a week in labor? Dayum, I want to be a part of THAT payroll! While food cost is generally a steady percentage of sales, I don’t think labor is the same. If he is doing 20k a week in sales I imagine labor would be more in the 2500-3500/wk range (and i exclude owner’s salary/draw from ALL labor calculations) or 12.5%-17.5%. Most stores of that volume that I have worked with run 16-18% labor costs.

Re: question regarding profitabilty of a little ceasars fran

33-35% food cost? I also worked there years ago and those numbers were for a full cheese pie, and I know the hot and ready has less cheese. Can you confirm the bagged cheese vs sliced in the Hobart in the past?

That food cost seems very very high to me…

Here is another side comment and maybe you can discuss. I see literally zero advertising from Caesars and in my area there are 25 stores. I MIGHT see a coupon every 6 months, no air advertising, no door hang etc. Why did they completely stop advertising?

As a potential franchisee I would be concerned that they take out marketing funds from your revenue but really dont do anything with it.

There is a franchise here trying to sell for 250k or so saying they are bringing home 120k in profits on 650k sales…

Re: question regarding profitabilty of a little ceasars fran

I’m doing just over 20K per week and the $3500/week labor you speak of would barely cover my instore labor. I still have almost 1500 deliveries a week I need to pay to have delivered.

Re: question regarding profitabilty of a little ceasars fran

I suppose it DOES depend on the delivery driver payment structure. We collect a delivery fee which is paid directly to the driver without any other compensation from us. Therefore, they are not “labor”. So the 3500 you speak of covering in-store staff only would be accurate. I exclude, of course, owner salary/draw from labor. Plus if you have a GM that can add a good 400-700 a week in labor as well.

Re: question regarding profitabilty of a little ceasars fran

I have to say that if an LC is doing 22-25% in labor, the manager should probably be taken out back and shot.

If this guy is running a 33% food cost (Hot N Ready) and a 15% labor rate (very possibly in this type of operation), and is spending 6% in royalty and marketing, he has a profit, after prime costs, of $9,200 per week or $478,400 per year. Take off the $385,000 he’s claiming in profit and he has $93,400 left over to pay the rest of the bills. That’s $7,783 per month in bills.

If you take out my salary and lease payments (which are really debt service), my store has about $9,000 in month bills. That includes a full-time GM and a very large $4,500 rent bill. It also includes a good size bill for delivery insurance, which I believe LC wisely dropped. I’m sure the average LC is spending much less than me in monthly bills.

Re: question regarding profitabilty of a little ceasars fran

I am getting out of the auto sales business and going to open a pizza delivery store. I make very god money in the auto business but I am 42 and burnt out. I worked for dominos in college and LOVED it. I would like any advice on start up as far as what I should do for, ovens, is it a good idea to have fountain drinks, should I prepare my own dough, and should I shave my own cheese or bag cheese, and if my delivery area consist of a college of 20,000 students plus another appx. 5000 households with an avg. income of around $30k-$35. I believe price will be the major sale point. Do you think door hangars is enough for advertising if I am aggresive with real good pizza and priced below the major names. Is there any way that I can predict how many pies I may average per month as a guess with low price and a college to market to. I was thinking around 5000-7000 pies a month. Does that sound off if I door hang 2000 doors a week. We used to door hang the dorms while at Dominos and we got slammed everytime. We would give the RA’s at the dorms pizza once a month to let us hang the doors. Please give me any advice you may think of. I want this to work. I will run it and I have a guy that I lives with me that is like my handy man and I plan on him going in during the day to prep all the dough, etc for the night so I will have very little cost for that. I will pay him $1000-$1200 per month for that. How many drivers and in store employess should I have on a 200 pie night open from 5pm-2am. I was thinking 2 phone people and me and one pizza helper and 5 delivery people. My delivery area is small it is about 10 mile radius. Thanks and I will appreciate anything you can offer.

Re: question regarding profitabilty of a little ceasars fran

That food cost % is righ on the money. Here is another reference from a past poster, Big Dave.
http://www.pmq.com/cgi-bin/tt/index.cgi?read=19921

The only cheese we used was an IQF mozz blend.

My labor number was based on staff (11-14%) plus the manager’s salary(12%). And red - the only point at which your labor stops being dependant on sales is when your AWUS drops to the point where you only need 1 driver and 1 insider every day. Then you can look at it as a fixed cost.

LC marketing also realy depends on the market. They have very effective marketing Co-ops set up and have a huge marketing department over there at the Fox theater.

Re: question regarding profitabilty of a little ceasars fran

Steveheel - Here is a post that shold cover all of your questions:

Opening a Pizza shop FAQ

Re: question regarding profitabilty of a little ceasars fran

I have over 9000 homes in my radius doorhang, fax, and put coupons in local paper and been open for a yr. next month and I dont see half of the #s you have came up with. Plus 200 p[ies in a night byyourself I would like to c that one… :lol:

Re: question regarding profitabilty of a little ceasars fran

I assure you that if my food costs were at 33% (which is abou right for hot n ready) and I had over a $1M in sales, that there is no way I do not get a 37% return.

Your payroll estimates are bad at best. There is no way you need $20k in payroll per month for a hot n ready operation. I agree with another poster that 15% in this kind of volume and product is more appropriate.

That leaves almost $15k for all other expenses per month. That is so much more than you need, plus a buffer.

I’m guessing one of two things. Either none of the stores you supervised hit a $1M so you are having trouble grasping what those kind of numbers do to profit margins, or you worked at LC 15 years ago when they were dangerously close to going out of business.