Trailing only McDonald’s in annual hamburger sales, Wendy’s is one of the most recognized restaurants in the fast-food industry. With over 6,500 global locations and with plans to open another 1,000 locations in the next year, this franchise is signaling there’s still runway to expand. Running this business takes hard work, but it’s popular menu draws in loyal customers.
How much will it cost to open a Wendy’s franchise? You’ll need an initial investment of $2 million to $3.5 million to open the doors to this franchise. Other financial requirements include a liquid capital of $2 million and a net worth of $5 million. If you’ve got this kind of cash sitting idle in your bank account read on or take our franchise quiz find an opportunity that fits your budget.
After the release of “The Frosty”, arguably the most well-known dessert on the Wendy’s menu, business boomed. Now, the franchise generates roughly $1.5 Million in revenue per unit–more than most popular fast food chains in the States. But is this the right franchise opportunity for you? I dig into the numbers of this burger business to reveal the advantages and challenges of this concept.
- Financial Requirements and Fees
- Average Sales / Revenue per Year
- Wendy’s Franchise Facts
- How Much Can You Expect to Make with a Wendy’s Franchise?
- Things to Consider
- Advantages of Wendy’s
- Challenges of Wendy’s
Financial Requirements and Fees
The initial fee for a 20-year franchise agreement is $50,000. The reason this fee is so high is because it covers the training and admin costs that associated with opening the franchise. This includes: initial training, providing additional assistance, and helping the operator understand the equipment and technological aspects of the outlet. This fee doesn’t include any development or start-up costs, but there is no additional fee for training (unless you spend money on travel).
Here’s a breakdown of some of the costs business owners must spend in order to open a Wendy’s outlet. Costs will vary based on your location building supplies, local labor, and permitting.
|Fees/ Expenses||Amount Needed|
|Liquid Capital||$2 Million|
|Net Worth||$5 Million|
|Estimated Initial Investment||$2 Million – $3.5 Million|
Here is a more detailed breakdown of the costs and fees required to open the franchise. Keep in mind that the site costs will vary depending on what type of franchise you open.
|Fee||Low-End Costs||High-End Costs|
|Construction Costs||$2 Million||$ 3.5 Million|
|Opening Inventory and Supplies||$10,000||$14,000|
It’s important to note that these are just the initial costs you’ll need to get your business started. There may also be additional fees that are not accounted for in these numbers that depend on the location or type of store you want to open. You will also have to consider the costs of kitchen equipment, seating, and decor.
Here is a breakdown of more fees and costs required of owning an Wendy’s:
|Type of Fee||Amount|
|Royalty Fee||4% of gross sales|
|Local Advertising||5% of gross sales|
|National Advertising Program||3.5% of gross sales|
|Background Investigation Fee||$500|
|Customer Care Fee||$64, annually|
|Cyber Insurance Fee||$650|
|Foundational Security Products||$2,361|
Average Sales / Revenue per Year
In 2009 and 2012, Wendy’s Restaurants reported highs of $2.44 billion in revenue. Although sales dipped in 2014, they climbed back to $1.71 billion in 2019.
Remember: Total sales revenue is not equivalent to profit. Investors interested in the business must consider costs of owning and operating a restaurant franchise, such as labor, supplies like paper products, inventory, to name a few.
Wendy’s Franchise Facts
|Incorporated Name:||Quality Is Our Recipe, LLC|
The founder, Dave Thomas, began the restaurant in 1969 as a high school dropout and Army veteran. He worked at restaurants ever since he was a thirteen-year-old, which gave him experience in the industry. It’s no wonder that he eventually opened a restaurant of his own after working as a restaurant manager at his grandmother’s eatery.
How Much Profit Does the Wendy’s Franchise Make Per Year?
Based on our research, you can expect to make net profit of $66,000 on average per year operating a Wendy’s store. Of course there are many store owners that net over $100,000 per year too.
According to the FDD, most Wendy’s franchises earn a median of $1.548 million in annual sales. In fact, 44% of outlets earned at or above that number.
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As stated earlier, Wendy’s outlets tend to make more money than most fast food restaurant chains. In 2012 alone, Wendy’s reported highs of $2.44 Billion in total. This doesn’t account for labor costs, but it is a significant financial high when compared to, say, Subway (which makes $490,000 less). This is more evidence that Wendy’s is a top-tier competitor with popular restaurants in the States.
Things To Consider
Type of Franchise
Wendy’s is focused on recruiting potential franchise owners who are interested in eventually buying more franchises of Quality Is Our Recipe, LLC. Purchasing a Wendy’s outlet is your first step in doing so. There are a number of ways in which you can open your Wendy’s outlet depending on where you live.
The traditional development model is one that is a free-standing site with a drive-thru. Expanded seating is available as well as a walk-in restaurant. These do well near freeways, shopping plazas, and other places in close vicinity to traffic and a significant population base.
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The non-traditional development model is another type of outlet you can open. These models serve airports, military bases, college campuses, hospitals, office buildings, and shopping malls. Wendy’s is interested in boosting the number of non-traditional locations due to their high foot traffic.
These high-visibility locations are convenient for customers and don’t require much advertising. Another benefit of opening a non-traditional model is that the Wendy’s development team supports franchises pursuing non-traditional outlets and provides prototype restaurant layouts, kitchen design, and project proposal assistance.
In order to keep your type of location up-to-date, Wendy’s incentivizes store remodeling in hopes of keeping the brand fresh with advertisement assistance.
One unfortunate aspect of owning a Wendy’s is that the restaurant franchise does not provide location exclusivity agreements. This means that a nearby Wendy’s can be easy competition for you. According to the agreement, franchisees do not have the rights to refuse potential new sites from building nearby. The company, however, does take careful consideration in recommending ideal locations for new franchisees.
As a business owner, you can select your own location based on site selection assistance from the Wendy’s real estate representatives. Before you begin contracting designers and engineers, the location and building plans must be approved by corporate headquarters.
Occasionally, the franchisor or affiliate can work with lenders to provide financial assistance. The terms of financing depend on a variety of factors, including business potential and annual revenue. In order to agree on these terms, they must be discussed with the lenders directly. In some instances, the franchisor or affiliate may offer its own leasing programs to new and existing franchisees. In very few circumstances, the franchisor may offer deferrals, waivers, and loans.
Advantages of Wendy’s
A benefit of opening and operating a Wendy’s is the assistance provided by corporate headquarters. Their engineering department gives franchisees standard construction documents that help meet national building codes. These plans are updated by the architect or engineer that the franchisee hires in order to meet local requirements. Design services for the building site are also given to franchisees, if they choose to accept. These design services are usually reserved for non-traditional models such as outlets at airports, military bases, or university campuses.
The advantages of Wendy’s restaurant ownership continues with increased freedom to choose who you work with. For example, The Wendy’s Franchise Development Program (FDP) gives business owners the option to work with an independent contractor in building a new site or revamping an existing site. There is, however, a FDP fee of $20,000. For new restaurant construction and rebuilds, the fee goes up to $30,000. In addition to the FDP fee, franchisees must pay all expenses on each project, including travel.
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Before you open your new Wendy’s restaurant, you, the restaurant operator, and all employees must attend an initial training program. This training program will give you and your restaurant team all that you need to provide a successful dining experience, thus raising your chances at business and financial success. Any managers that you employ later on down the road have the option to attend the initial training program, but you’ll need to pay for travel. In general, the program involves 20-24 weeks and includes online classes led by an instructor. Occasionally, training can be offered at in-person restaurants certified to do so.
A unique feature of Wendy’s is the digital app and delivery services offered by the franchise. The company partners with delivery services, such as DoorDash, to give customers easy access to their menu. This smartphone app boosts sales by letting Wendy’s patrons customize their order and receiving it in their home without even having to leave the sofa. By 2024, the chain aims to increase digital sales by 10% – up from 2% in previous years. This unique feature sets Wendy’s apart from its competitors by increases the likelihood of sales in the future.
Senior-level staff members at Wendy’s value their relationship with franchisees. To prove this the company created the a franchise advisory council, elected by the franchisees, to allow franchise owners to work directly with higher-level members of Wendy’s. Some of the ways these relationships are cultivated involve hands-on support, professional real estate council, engineering advice, site selection, site layout, design assistance, and initial and on-going construction services.
- Engineering assistance.
- Franchise Development Program.
- In-depth training program.
- Unique digital app.
- Close relationships with senior-level members.
Challenges of Wendy’s
Wendy’s has a number of challenges in its operation and development. The company does not provide exclusive area agreements to franchisees as stated earlier. This could lead to possible competition with surrounding locations or market saturation.
Another challenge is the immense financial investment of opening and operating a Wendy’s. While many fast food restaurants only require $1 Million in net worth, Quality Is Our Recipe LLC requires a net worth of $5 Million with liquid capital of $2 Million. This hefty expense is daunting, yet it’s important to remember that the financial success of Wendy’s makes it a worthwhile investment. Wendy’s is second to only McDonald’s in annual hamburger sales and the concept has proved it’s longevity over the years.
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Financial assistance is not guaranteed, even if you meet the criteria for loans or waivers. In fact, very few circumstances meet the requirements for fee deferrals. This can pose a challenge for anyone without significant assets.
- No area agreement or protection.
- High cost of entry.
- No guarantee of financial assistance.
Is the Wendy’s Franchise Right for You?
In order to figure out if Wendy’s is the wisest business opportunity for you, think back on your prior business experience. Do you have industry experience? Do you love the concept and menu? Would it the food service industry be fun for you? Do you have an experienced operator and management team that is committed to the operations of the quick service restaurant? Do you have restaurant management experience and a passion for customer service? These are all questions you’ll need to honestly answer to determine the right choice.
In addition to the above qualities, ideal candidates are expected to work directly in the restaurant. You can hire a restaurant operator other than yourself, but Wendy’s strongly recommends that you involve yourself as much as possible at the physical location. This is because working directly with your team cultivates a strong employer-employee relationship and generates a more personal approach to business leadership.
If you’re interested in applying to Wendy’s and are not currently opening another franchise, go ahead and contact the business at [email protected]. The approval process takes some time and the application fee is $5,000, but once you are approved you are ready to begin opening your very own business.