Papa John’s is one of the few pandemic success stories. The brand has done well (under the circumstances) during the coronavirus outbreak. In addition, the company has grown significantly over the past three decades and weathered some rocky storms. Has the recent uptick and strong brand value interested you in buying a Papa John’s franchise? Want to know the actual Papa john’s franchise cost (hint: it could be as low as $26,500)? Let’s break it down and lay out the ACTUAL Papa John’s franchise cost.
The Papa John’s Brand
Before we get to the Papa John’s franchise cost, let’s take look at the brand. Papa John’s runs the fourth largest take-out and pizza delivery restaurant chain in the United States. The company is headquartered in Jeffersontown, Kentucky, a suburb of Louisville. Papa John’s was founded in 1984, and the company grew quickly before going public in 1993. A year later it had 500 stores, and by 1997 it had opened 1,500 locations. Papa John’s primarily takes carryout and delivery orders, although some stores have tables and chairs for dining in.
In January 2002, Papa John’s became the first national pizza chain to make online ordering available to all of its U.S. customers. The franchise currently has over 5,000 units worldwide and relatively low start-up costs. In July 2018, Papa John’s voted John Schnatter off the Board of Directors after Schnatter was recorded using a racial slur during a training call. Schnatter was the Founder, largest shareholder, and board chairman at the time. The brand appears to have weathered the storm and, more recently, saw a sales spike during the coronavirus pandemic.
How Much Does a Papa John’s Franchise Cost?
Now to the Papa John’s franchise cost. Papa John’s is one of the cheapest restaurants to franchise. The average franchisee can expect to pay out $300,000 to open a new Papa John’s restaurant. On the low end, you can start a non-traditional Papa John’s for just over $25,000. By comparison, a McDonald’s restaurant requires $1 million to $2.2 million in startup costs. To sweeten the deal, Papa John’s is waiving its $25,000 franchise fee for new restaurants, if certain conditions are met.
For all your franchise guides, check out FranchiseHOW.
There are actually two types of Papa John’s franchises, per the company’s Franchise Disclosure Document (FDD):
A Standard Restaurant Papa John’s. A retail restaurant devoted primarily to the sale of pizza and related food products. The majority of these restaurants are operated on a delivery and carry-out basis. However, there are a few restaurants that offer dine-in service.
A Non-Traditional Papa John’s. A retail restaurant that operates in non-traditional venues like sports stadiums and food courts.
The below table provides a complete breakdown of all initial investment costs for a Standard Restaurant and Non-Traditional Papa John’s in 2020.
Initial Cost Breakdown – Standard Restaurant
Estimated Initial Investment
Expenditures
Low
High
Initial Franchise Fee
$0
$25,000
Real Estate Brokerage Fees
$0
$10,000
Professional Fees
$500
$12,000
Construction/Leasehold Improvements
$50,000
$500,000
Furniture, Fixtures and Equipment
$30,000
$120,000
Information System
$20,000
$30,000
On-Site Support Fee
$0
$2,500
On-Site Installation Fee
$0
$5,000
Help Desk Service Fee
$0
$1,000
Technology Fee
$0
$420
Signage
$3,000
$20,000
First Month’s Rent
$1,200
$5,000
Security Deposit and Other Deposits, Insurance Premium
Security Deposit and Other Deposits, Insurance Premium
$1,000
$6,000
Opening Inventory and Supplies
$2,000
$12,500
Grand Opening Advertising
$0
$10,000
Training Expenses
$2,000
$6,000
Miscellaneous Opening Costs
$2,500
$20,000
Additional Funds – 3 months
$15,000
$50,000
ESTIMATED TOTAL
$26,500
$388,920
Ongoing Papa John’s Franchise Cost Breakdown
In addition to the above initial investment costs, it’s important to know what else will ultimately play into Papa John’s franchise cost. Perhaps most significantly, you’ll be required to pay a royalty between 5% and 6% of net sales. You’ll also be responsible to contribute up tp 3% of net sales (or higher in certain circumstances) to Papa John’s marketing fund.
In addition, over a dozen contingent fees may, at some point, be required. The below table breaks down and explains all of Papa John’s ongoing fees.
Type of Fee
Amount
Royalty
5% of Net Sales of the restaurant for each Period; 6% for Small Town Non-Traditional Restaurants.
On-Line Transaction Fee
1.75% of Net Sales via Internet on-line ordering.
Transfer
$4,000, or if transfer is of multiple Restaurants to more than one unaffiliated transferee, $4,000 per transferee.
Renewal
$4,000; $1,000 for a Small Town Non-Traditional Restaurant.
Audit Expenses
Cost of audit, understatement plus interest at 12% per annum.
Management Fee
Compensation, travel and living expenses of the appointed manager and a per diem fee of $200.00.
Costs, Attorneys’ Fees and Pre-judgement Interest
Will vary under circumstances.
Indemnification
Will vary under circumstances.
Marketing Fund Contributions
Maximum: Up to 3% of Net Sales unless higher amount approved by 2/3 majority vote of Members. As of the date of this Disclosure Document, 5%. Non-Traditional Restaurants pay 25% of the standard rate.
Papa Card Transaction and IVR Fees
Maximum: 2% of Papa Card redemption -transactions, unless the franchisor approves a higher rate.
Cooperative Contributions
Minimum: 2% of Net Sales. Franchisee can opt to take the Cooperative contribution rate down to make the total Marketing Fund contribution rate 7% of Net Sales. This can be done with majority vote of restaurants in the Cooperative or by agreement. Coop members may opt to pay the higher amount, so current highest contribution rate may well exceed 2.5%. Non-Traditional Restaurants pay 25% of the co-op’s contribution rate for standard restaurants.
Local Advertising
Minimum: 8% of Net Sales, less amounts contributed to the Marketing Fund and Cooperative; Minimum 2% of Net Sales for Small Town Non-Traditional Restaurants.
On-Site Installation and Support Fee
$2,000 for a standard 2-day installation, $1,000 per day for each additional day. The franchisor may increase this fee.
Software Enhancement Fee
$140 per month. The franchisor may increase this fee.
Help Desk Service Fee
Flat fee of $70 per month or per call fee of $80 per hour with a 1/2 hour minimum. The franchisor may increase this fee.
Required Purchases
Will vary under circumstances.
Training Fees
$100 per year per restaurant.
How Do I Start?
If you’re in for the above, the application process is simple. But before you begin confirm you have the required financial resources. Your net worth must be at least $150,000, $50,000 of which must be liquid. You must also have access to financing of up to $200,000.
Next, fill out the application on Papa John’s website. Filling out the application is free and doesn’t obligate you to open a franchise with Papa John’s. Note: with application submission, you authorize Papa John’s to run a credit report as well as an investigative consumer report.
Papa John’s will take it from there! Now you know the true Papa John’s franchise cost and how to get started.
