According to Costco’s annual report, they brought in $227.7 billion in revenue in 2022. With revenue figures like this, it’s no wonder an investor or entrepreneur would be interested in learning more about the franchising options with Costco Warehouse.
Unfortunately, Costco is not available to franchise. They are a corporation that owns all of their stores worldwide.
But don’t let this information stop you from wanting to do business with Costco. You can still invest in this publicly traded company in a variety of ways, including the stock market. You can also take our 7-minute quiz to get match with a franchise that are looking for partners right now.
Financial Requirements and Fees
Since you cannot franchise Costco, it is unknown how much the expenses would be if you were to run it. However, an estimate from someone who has worked for 20 years in the apparel industry says that it would be around $100 million to open a single Costco store. Keep in mind that this is an unofficial claim and this estimate was also done 7 years ago. Costs would be different by now as well due to inflation, land and labor increases.
When you stop to think about it this estimate makes a lot of sense when you think about it. First you’ve got to purchase a commercial property that’s large enough to fit a warehouse that’s on average 146,000 square feet. Then you need to build and outfit the warehouse including electricity, commercial refrigeration, lighting, a commercial kitchen for the food court, a bakery and all the other elements of a Costco. Next you’ve got to consider the costs of setting up a large parking lot and potentially even build a carwash and gas station depending on the location. It all adds up to an enormous investment.
Average Sales / Revenue per Year
According to reports, Costco’s revenue for the year 2022 was $226.954 billion. This is an 15.83% increase from their sales in 2021 that came in at $195+ billion.
Costco Store Franchise Facts
||848 (584 in United States)
||Costco Wholesale Corporation
||Does Not Allow Franchising
Costco’s roots started in 1976 when the pioneer of warehouse club retailing, Sol Price, opened Price Club. In 1983, James Sinegal and Jeffrey Brotman opened Costco in Seattle Washington. The two stores merged, becoming PriceCostco in 1993 generating around $16 billion annually. It was in 1997 when the name was adapted to Costco.
Costco was successful in becoming a warehouse club that when they opened in 1983, they were able to generate sales of $3 billion in less than 6 years. Fast forward today, Costco is now captures billions in annual sales.
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The warehouse club is known to have a membership service that is applicable for use worldwide. Members pay a one-time fee that covers a 12-month period from the date of enrollment. The membership card is then shown upon entrance at every Costco location to permit entry.
Costco can carry around 4,000 Stock Keeping Units in all of their warehouses. The brand also assures that each product is of high quality with an affordable selling price that’s considered the best value to their club members.
The following products are available to purchase at Costco stores:
- Baby Items
- Beauty Products and Accessories
- Clothing, Luggage, and Handbags
- Floral and Gift Baskets
- Gift Cards and Tickets
- Gourmet Food
- Grocery, Household Essentials, and Pet Care Items
- Health and Personal Care Items
- Home and Installation Services
- Kitchen Items
- Jewelry, Watches, and Sunglasses
- Office Products
- Patio, Lawn, and Garden Items
- Sports and Fitness Items
- Tires and Auto
- Toys and Books
Costco also offers the following services:
- Business Deliveries
- Pharmacy (Prescription Drugs, Immunizations, Pet Medications, etc.)
- Auto Parts and Services
- Home and Installation Services (Carpet and Flooring Installation, Gutter Installation, etc.)
- Business Payments and Processing
Costco is also known for their Kirkland Signature which is Costco’s private label. The brand was established in 1995 and they’re known for their high-quality yet affordable products. There are around 364 products under the Kirkland Signature brand and they make up around 30% of Costco’s revenue.
What’s also popular at Costco is their food court that carries huge slices of pizza, hotdogs, chicken wings, churros, chicken bake, and more for under $5. Though you would still need a membership card just to purchase from the food court, there are other Costco locations where the food court is located outside. In the past, you didn’t need a membership to dine at these food courts, but that policy changed over the past couple years. You’ll need a valid Costco membership to dine at the food court these days.
The following locations are where a Costco can be found:
- United States
- Puerto Rico
- United Kingdoms
- New Zealand
You can invest and become a part owner in Costco by purchasing stock in the company. To buy stocks, you’ll first need a brokerage account where you’ll deposit money to purchase stocks. The ticker symbol for Costco is COST on the Nasdaq stock exchange and at present, Costco’s stock price is at $506.45 per share at the time of writing. After purchasing, you’ll need to watch and observe your investment regularly.
Craig Jelinek is the Chief Executive Officer and Director of Costco since 2012. Their headquarters can be found in Issaquah, Washington, United States
How Much Does a Costco Store Make in Profit?
According to reports, Costco received $27.572 billion in gross profits in 2022 which is a 9.22% increase in gross profits in 2021.
Advantages of a Costco Store Franchise
You might still be wondering if you can franchise a Costco, what the advantages would be or if you invested in them. Here are just a few reasons this bulk retailer is so special.
Membership shopping provides an exclusive experience that customers will not be able to find anywhere else. They’ll be given easy access to affordable deals and low prices. Customers are also assured of the high quality of the products. The membership exclusivity also provides everything in one roof such as auto and repair services, bills and payments services, insurance, and many more.
If you were to franchise a Costco in the future, you’ll be providing a business that has all these exclusive perks which makes it an ideal place for shoppers to do all their errands in just one location.
Customers can get great deals at Costco. For instance, a 2 liter sized Olive oil at Costco is only for $13.49 as compared to other stores that sell Olive Oil for the same size at $20. You can also get a 3-pound rotisserie chicken for $4.99 while other places sell them for $5 to $7. There’s also the food court that famously allows you to buy a hot dog and soda for $1.50.
There are also lots of ways to find a bargain at Costco such as shopping during seasonal sales or checking the price for marked down items. In conclusion, Costco will always have a deal that saves money which in turn reels in more members to shop with them.
Costco Food Court Menu Prices.
No Advertising Budget
Costco is known for not spending anything on advertising. Instead, they use the money to cut the prices on the items that they sell and to increase wages. Then Chief Executive Officer Jim Sinegal was known for being frugal so his employees and customers can benefit from it. Sinegal’s salary was only $350,000 as compared to the other CEOs in the Fortune 100 list.
As mentioned above, Costco isn’t just an American brand but a name that is recognized worldwide for their quality and affordable deals. You can find Costco Wholesale stores in 14 countries all over the globe. They also have around 120 million member cardholders. And with their continued success and billions of dollars in revenue, Costco is sure to continue expanding into new regions and countries.
Challenges of a Costco Store Franchise
Doing business with a big corporation that has been around for years can still have some challenges. Here are some of the challenges facing this company.
Limited Customer Market
As mentioned above, Costco is a membership warehouse club which means that in order to shop there or get exclusive access to their deals, you’ll need to register to become a member. The registration fee for a basic membership which is a Gold Membership is $60 every year. With that said, not everyone can get in at Costco so the customer market is quite limited.
Those who shop at Costco have no choice but to buy in bulk or to buy items that have sizes that are larger than the usual ones you can see at the regular supermarkets. Though this is an advantage for small to medium sized businesses, it can be quite a challenge for individuals. For instance, buying perishable items in bulk can lead to products becoming rotten if not used daily.
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Lack of Advertising
Though it was mentioned above that Costco does not spend on advertising for the benefit of their employees and customers, it can also be a disadvantage since deals and other featured products and services will not reach a wider customer base. If they did invest in advertising, they could reach even more people and get them to sign up for a membership.
Large Land Area
The size of the average Costco Warehouse store is 146,000 square feet. According to Cheapism, it’s like a city block in Manhattan. With that huge area size, Costco would need to find locations outside the city. Or if you own a piece of land and wish to pitch it in to Costco, you’d need to be able to meet their land area size requirements.
Though the food court is a fan favorite at every Costco, according to a food handler who worked there, Costco does not make any money off of the food items that they sell in the food court. The concept of Costco’s food court is mainly a “Member Service” rather than a business.
Is a Costco Store Franchise Right For You?
You can’t franchise a Costco Wholesale store but if you could, it would be an opportunity worth evaluating. However, with a huge land requirements, number of employees, and logistics, raising the capital required to own a store wouldn’t be easy even if you’ve had fantastic financial successes in your lifetime.
What is an alternative Costco Store franchise?
You may opt to invest in a grocery store instead of a membership shopping club at the moment. One store is Save A Lot. They have over 1,150 units and have been around since 1977. They offer exclusive brands and discounts as well.
To become Save A Lot’s retail partner or licensee, you can expect licensing costs to reach $750,000 to $1,500,000. Another retailer who serves frugal customers to take a look at is Family Dollar.
There are a lot of things to love about Costco. They’re the ideal place to get discounted bulk items. They have everything one needs from basic necessities, appliances, jewelry, to car repair and services. They also provide a membership only shopping experience which gives one exclusive access to affordable and high quality products.
Costco Wholesale continues to be a giant in the world of membership shopping with more growth on the horizon. Unfortunatley, you can’t franchise this opportunity right now. If that ever changes, I’ll be the first to let you know here.