Are you thinking of buying into a franchise? Confused about what to do? This post looks at Arby’s, an established and resilient food franchise.
In this post, you will learn:
- The history and background of Arby’s
- What you can expect as a new franchisee
- The costs involved
- My opinion on whether it is a good investment
- Next steps if you are considering becoming an Arby’s franchisee
With more than 2800 restaurants worldwide, Arby’s Inc. is a subsidiary of Triarc Companies, Inc. Among other things, Arby’s is known for its roast beef sandwiches. Their food franchises in the United States allowed the chain to expand briskly during the 1970s and 1980s. Arby’s had more than 2,500 stores by 1995.
Right now, there are more than 3,400 restaurants in 8 countries. So it’s kind of a big deal.
Back-to-back best franchise deal.QSR Magazine
Forrest Raffel was born in May 1922. His younger brother Leroy Raffel was born on March 13, 1927. During World War II, both brothers served in the military (Forrest in the Air Force and Leroy in the Naval Reserve). Upon graduation from Cornell University’s School of Hotel and Restaurant Administration, Forrest opened his own business. Leroy Raffel graduated from the Wharton School of Finance at the University of Pennsylvania.
It wasn’t until the 1950s that the brothers purchased their uncle’s restaurant equipment business and founded Raffel Brothers, Inc., an industry leader in providing food service consulting and restaurant equipment for operators.
It was Thursday, July 23, 1964, when the brothers opened their first Arby roast beef sandwich shop in Boardman, Ohio. After being unable to use the name “Big Tex,” they called the shop “Arby’s” to use the initials “R” and “B” from Raffel Brothers.
Arby’s was positioning itself as an “upper scale” quick service restaurant by selling roast beef sandwiches at affordable prices compared with McDonald’s hamburgers. By the late 1960s, The Raffel Brothers had over 300 locations across more than 40 states, thanks in part to the success of the first store. It set the precedent with spaces that had a welcoming dining atmosphere, a fresh line of sandwiches and a very strong brand culture.
Arby’s franchise cost: what can new Arby’s potential franchisees expect?
According to Arby’s:
You get the strength of a brand with a 45-year history of doing things different and better. You get unparalleled marketing, franchising, and operational support. And best of all, you get to join one of the most loyal franchise families in the restaurant business, a group of go-getters who want you to succeed and will do whatever it takes to help get you there. Sound like a place you can call home?
It’s the second-biggest sandwich restaurant brand in the world. The 45-year history is an attractive pull for new franchisees because this makes it an established brand with a huge customer base and strong sales.
The business model has been evolving over the past 55 years to ensure that every franchisee will benefit quickly. In order to make Arby’s restaurants easier to run and maintain, every aspect of the purchasing, storage, training, and management processes have been streamlined as part of new franchisee orientation.
Arby’s argues that all of this makes it an accessible franchise opportunity and a positive overall experience. New franchisees who work hard can expect to feel part of the Arby family quickly.
When you buy a franchise, you become a part of a system. The majority of franchise systems offer training so that new franchisees can quickly master the business. Franchisees at Arby’s must attend a “New Franchisee Orientation (NFO)” which consists of either a one- to two-day classroom program. Other than travel, lodging, and meals, there is no cost associated with this program.
In addition to multi-unit operators and retailers, Arby’s is looking for franchise candidates with a success record. New franchisees interested in applying are also encouraged to do so. However, they must either have licensed, experienced restaurant operators on their team or complete an extensive training program.
As a restaurant business, Arby’s has focused almost entirely on sandwiches, with roast beef sandwiches being the signature menu item. One good thing for new franchisees to bear in mind is that Arby’s has a sensible price point, with customers coming back time and time again for affordable, tasty meals.
Arby’s franchise cost: what is the total investment and fee level?
The initial franchise fee for having your own business as an Arby’s franchisee is $37,500. For any new restaurants you open, you can expect to pay $12,500.
When it comes to investment levels (startup costs) , you are looking at:
- From $336,500 to $927,900 for a leasing arrangement
- From $750,000 to $2,474,400 for purchase of land building arrangements
The above Arby’s franchise cost ranges cover the initial license fee of $37,000 (before you open a second restaurant).
The additional fees are not beyond the reach of most people. The royalty fee for an Arby’s franchisee is normally set to 4% of the gross sales a business makes. This is pretty fair for a fast food franchise, compared to the up to 5% McDonald’s can charge. Further additional fees are approxiately 4.2% for advertising and marketigng.
Finally, Arby’s requires that new franchisees for any new openings have a net worth of $1,000,000.
Veterans as Arby’s franchisees
As a member of VetFran, Arby’s provides career opportunities for honorably discharged or wounded veterans. Vets enjoy reduced development fees (normally $12,500, but only $6,250 for vets) when they open Arby’s restaurants. They also benefit from a waived initial license fee and a reduced royalty fee of 1% for the first year.
A good investment?
In its Franchise Disclosure Document for 2020, Arby’s reports EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent/real property costs) of $246,192 per restaurant. This figure is based on 1,111 units. Total sales have reached $4 billion across 3,500 locations in 2019.
Even with COVID putting pressure on hospitality in general, Arby’s seems to be a market opportunity that is well worth considering.
The next step
Head on over to the franchising page to get in touch with the team that works with new franchisees.
- You’ll be given a Franchise Disclosure Document (FDD) to review
- You will fill out an application and Arby’s will run a financial check and background checks
- The Franchising and Operations leadership will meet with you and have a discussion about your experience in the industry
- A discussion will take place around territories for you to set up in
- After final approval a Development Agreement (DA) will be given to you to sign
- Once the DA is signed and the fees are paid the building and construction team will begin working with you to build your restaurant
I see Arby’s as being a solid franchise offer. It does take some considerable investment at first, but it’s an established, reliable business that is continuously expanding.
Don’t know where to start? How about my Beginners Guide?