What does it cost to open a Pizza Hut franchise? A total investment from $297,000-$2,109,000 in addition to a franchise fee of $25,000 is required. You’ll need liquid capital of $360,000 and a net worth of around $700,000. Liquid capital is the amount you need on hand while total net worth is a combination of your assets such as a home and retirements accounts.
In this report, we look at the challenges, advantaged, and fee structure of this pizza chain so you can make an informed franchising decision. View the detailed analysis of Pizza Hut’s business model below or take our 7-minute franchise quiz to find the right option for you.
Table of Contents
- Financial Requirements and Fees
- Average Sales / Revenue per Year
- Pizza Hut Franchise Facts
- Average Profits
- Advantages of Pizza Hut Franchise
- Challenges of Pizza Hut Franchise
Financial Requirements and Fees
|Fees/ Expenses||Financial Amount|
|Total Investment||$297,000 – $2,109,000|
Here’s a further breakdown of their initial finance fees.
|Name of Fee||Low||High|
|Initial Franchise Fee||$25,000||$25,000|
|Building and Site Improvements||$190,000||$1,575,000|
|Computer System Training||$0||$1,500|
|Additional Funds (3 months)||$5,000||$21,500|
This is a list of the remaining fees that may occur monthly or year, which includes their royalty fee.
|Type of Fee||Amount|
|Monthly Service Fee||6% of gross sales (6.5% under certain circumstances).|
|Taxes||As levied by tax authorities.|
|System Advertising Fund Contribution||4.75% of gross sales.|
|International Pizza Hut Franchise Holders Association (IPHFHA) Dues||4.75% of gross sales (set by franchisees).|
|Digital Innovation Fees||Currently, $0.38 per transaction conducted through a digital or other automated channel established by the franchisor.|
|Restaurant Technology Fee (currently, a “SUS Fee”)||$2,500 per year.|
|Software Training Fee||$1,500 plus travel and living expenses.|
|Initial Training Costs||All living and transportation expenses of all trainees. The amounts are unknown and may vary depending upon factors such as the third-party supplier selected and the franchisee’s distance from training. Additional and subsequent trainee charge: $500 per person per week.|
|On-Site Training and Assistance||The then-current training fees plus expenses.|
|On-Going Training||The then-current training fees plus expenses.|
|Proprietary Products||Franchisees must buy proprietary products from the franchisor (RSCS, if it offers and sells same), its affiliate or designee.|
|Inspection and Testing Costs||Franchisees must reimburse the franchisor for all costs and expenses incurred in connection with the review, inspection and/or approval of a proposed product or supplier, including any salary, travel and lodging expenses.|
|Audit||The amount of the audit expenses is unknown and may vary depending upon factors such as the auditor selected.|
|Late Charges||Currently 1.5% per month.|
|Unauthorized Closure||An amount equal to 24 times the average Monthly Service Fees paid or due with respect to the closed system restaurant during the prior calendar year.|
|Relocation||Varies, depending on the franchisor’s costs in connection with reviewing and/or approving the request.|
|Transfer Fee||$2,500 plus an additional $250 per system restaurant transferred.|
|Indemnification of PHLLC||Varies.|
|Attorneys’ and Experts’ Fees, Court Costs||The amount of these fees and costs are unknown and may vary depending upon factors such as the attorneys and experts selected and the court costs.|
Pizza Hut does have a large collection of fees that greatly impact profit margins and one of the big reasons why franchise owners aren’t making a lot of money.
Average Store Sales / Revenue per Year
The average Pizza Huts store generates $714,000 sales per unit on average. The entire system makes $3.5 billion average sales in revenue per year. Each franchisee will average around $100,00 profit overall after all expenses. International sales for the franchise have been doing well and increasing their global footprint, while struggling inside the United States.
Pizza Hut Franchise Facts
|Incorporated Name:||Pizza Hut|
|Industry||Quick Food Services|
How Much Profit Does Pizza Hut Store Actually Make?
Franchise owners make an average profit of $100,000 per year. However, the end profit margin ends up being only 3%-7% of annual store sales due to all the fees franchisees have to pay to their corporate headquarters.
There were of course many stores that outperformed averages described above. Here are some reasons why certain stores exceed expectations.
Pizza Hut has over 17,000 locations internationally so they have a broad footprint. A Pizza Hut franchise can be located almost anywhere including school campuses, airports, malls, and stand-alone stores. Delivery, carry out, or pick up services have been available for decades as well. This provides added versatility that not all fast-food restaurants can offer.
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Pizza Hut’s menu has been keeping up with trends and consumers’ tastes. They’ve offered a lot of unique promotions and supported creative ideas, such as macaroni and cheese sauce, cheeseburger stuffed crust, meat pie crust, hot dog bites crust, beef poutine, and much more! Pizza Hut also offer chicken wings, which are highly profitable menu items that are easy to cook. Depending on where certain franchises are located, they will adapt their menu to what’s popular in the area, focusing on creating new types of pizzas flavors like the popular Taco Pizza that’s available in many parts of the Midwest. This helps to drive repeat customer visits.
Without the support from their headquarters Yum! Brands, Pizza Hut wouldn’t be in the position it is now. They are also the reason why Pizza Hut’s menu was able to be so diverse. Yum! Brands lets that happen and drives the marketing and management to handle outreach to customers. The company knows the ins and outs of how to get your franchise into the eyes of customers since they specialize in branding. If you become part of the brand and name, you are sure to get the marketing and tech support through mobile apps you need.
Advantages of Pizza Hut Franchise
Here are some of the key advantages of starting a franchise with Pizza Hut.
The main thing to take away is that you’ll be part of a huge network and brand company. Not only will you be related to Pizza Hut Inc., but also the other subsidiaries of Yum! Brands like KFC and Taco Bell. This can open a lot of roads and opportunities for your franchise expansion in the future.
For instance, your marketing will already have a big foothold in the social media presence. You get branding support and even multi-branding. For instance, Pizza Hut is already adding chicken wings to the menu. Pizza and chicken wings go great together, creating more opportunities for growth, larger customer base, and of course more sales.
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Your Pizza Hut franchise will also be able to do delivery and carry out services, so customers have more options and variations on how to do business with you.
You can also get support via toll-free telephone lines or online from the head corporate offices. They will provide any sort of training and keep you and your staff up to date with trends and provide management support. Pizza Hut alone has over 17,000 locations so the networking opportunities within this system are abundant.
Pizza Hut also provides territory protection for your opening franchise. This helps ensure other restaurants and competitors within a certain radius of your stores so you’ll have a defined region where you can be confident other store owners can’t entrench on.
Pizza Hut does have some lending assistance programs they offer for franchises. However these don’t go towards the initial investment, so you’ll need to come up with your own funds up front. But this is still a great option since some franchises don’t offer any sort of financial assistance.
- Offers some financial assistance through programs
- Yum! Brands offer support for management, training, etc.
- Creative menu options
Challenges of Pizza Hut Franchise
Every franchise has their challenges that they need to overcome. Pizza Hut is the same.
There are plenty of different pizza restaurants out there with some that are specialized in pizza or offer different varieties, so it’s a bit challenging for Pizza Hut to compete with increased competition. For example, Domino’s is the lead in American fast-food restaurants serving pizza with 17,600 stores in 90 countries. There is also New York-style pizza or Chicago-style pizza that gives competition too in addition to small ma-and-pa operators.
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Another aspect to consider is that business and sales have been declining for Pizza Hut in the United States as well. This can be a result of trends, competition outdoing Pizza Hut, or others factors, but the fact is same store unit sales fell by 4% last year. With that being said, the company does seem serious about turning around performance in the company with new management and menu innovation.
Along with a slight decrease in sales, the amount of money you need to invest can add up, especially with the fees that you’ll encounter down the road. The range of expenses could be $300,000 to $2 million! It’s quite a big jump. There are also ongoing fees that will build up to be a good amount of money that will snatch at your profit margins.
In addition, during the start-up of your franchise, Pizza Hut doesn’t help with the construction of a store. They also require that your opening of the restaurant has to take place in a year, so you’ll have to make sure everything construction of a store is completed and have you have finances / funding in place.
To make sure that the start-up shouldn’t have too much trouble especially with financing, Pizza Hut does credit reports and checks on potential franchise owners to make sure they have good credit.
- Lots of competition
- Initial investment isn’t a small amount
- Slight decrease in overall sales
- Strict vetting process
Is the Pizza Hut Franchise Best for you?
Opening a Pizza Hut franchise will require significant finances so you need a combination of liquid capital and assets ready before investing in the franchise. Even then, your credit must be in good standing because Pizza Hut will not let you continue if it isn’t up to par. In general, a credit score above 740 is considered good with scores over 800 considered to be excellent.
For Pizza Hut’s initial training, you’ll have to do more on-job hours than classroom training. Be prepared to get your hands if not dirty, a little bit cheesy and saucy. Not to worry if you’re concerned about the business management side since they definitely have the resources to educate you in the area.
The ideal candidate for Pizza Hut is someone with prior experience managing people or a business and preferably related to the restaurant or fast food industry. This will speed up the approval process on their end to get you ready to operate on your own. It’s not that Pizza Hut won’t train you at all if you haven’t managed anyone or worked in the food industry, but it will take less time on them to train and educate someone with experience.
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Though you’ve have the backing of the Yum! Brands, don’t expect everything to be taken care of for you because you’ll need to step up in order to make a profit for yourself. There’s a lot of competition in the United States when it comes to pizza and you need to stand out. As a franchise owner, you’re betting that the management of Yum! Brands can continue to innovate in future years. Historically, this bet has been a good one, but there’s no guarantee on the future.
Pizza Hut is one of the biggest American fast-food chain restaurants that focus on pizzas, placing only second behind Dominoes. Pizza Hut was originally founded in 1958 and also provides options such as pasta, side dishes, and desserts that are Italian-American cuisine. It has over 17,000 store locations internationally, which includes several countries all over the world.
As mentioned earlier, Pizza Hut is a subsidiary of Yum! Brands, Inc., which is one of the largest restaurant companies including Kentucky Fried Chicken (KFC) and Taco Bell. They are backed by a big brand company that offers lots of support for marketing and business management, making over $3.5 billion in sales system-wide with just Pizza Hut franchises.
Overall, there is no restaurant franchise that’s easy to operate and manage. If you’re looking for simple or easy, franchising is not the right path for you. However, if pizza is your forte, you have great credit, and are able to follow a winning playbook, Pizza Hut will welcome you with open arms! If you’d like to learn more about this opportunity, visit the official website for prospective franchisees to learn more about the business.