Is Little Caesars Franchise Experiencing Problems?

Описание: Does the Little Caesars franchise have a problem? How much does it cost to open a Little Caesars franchise, how much can you earn as an owner and is it a good investment? Today on Franchise Inspectors

📜 Video Chapters
00:00 Intro
00:25 Little Caesars
00:58 Little Caesars History
01:52 Investment Cost
02:48 Royalty
03:00 Advertising Fee
03:27 Revenue Transparency & Red Flags
04:19 Revenue Estimate
04:39 Franchise Closures
05:33 Franchisee Legal Conflict and Store Closures
07:20 Liquidated Damages Clause
09:43 Hidden Message in Little Caesars Logo
10:04 End

Little Caesars is currently the third-largest pizza chain in the United States, just behind Pizza Hut and Domino's. As of their most recent 2018 disclosure documents Little Caesars had a total of 4262 locations, Dominos 5904, pizza hut the winner at 6111, but, two of these pizza places have been growing while one has been quietly closing doors that could be the beginning of a disturbing trend.

Little Caesars Franchise opened in 1959, first location was in Garden City Michigan. It wasn't until 1979 that the companies well known "Pizza, Pizza" catchphrase was introduced. The reason this was done was to point out the fact you could have two little Caesars pizzas for the price of one little Caesars pizza. In Canada you will never hear the Pizza Pizza catchphrase because little Caesars, due to a copyright problem with the Canadian Pizza chain , called Pizza Pizza. So up here we hear "Two Pizzas, or "delivery delivery"

In 2004 the "Hot 'n Ready" offer began by promoting $5 carryout pizzas which over the years have made some franchisees unhappy, some of them even having to close their doors, due to declining margins.

Your investment cost to open a Little Caesars franchise will range between $354,700 to $1,433,500. And we had a comment recently asking what determines these ranges. Great question, These figures are the actual lowest, and highest amounts that franchisees have opened real life Little Caesars restaurants for. So the lowest price is usually a smaller existing restaurant that needed very little by way of changes, and the highest was likely a very large location that opted for all the bells and whistles. It is unrealistic to think you can open for the lowest number, its usually somewhere in the middle on average.

Royalties are the greater of 6% of your gross sales or $100, paid weekly. Needless to say if your payment is only $100 you have problems. Little Caesars collects a hefty advertising fee that is larger than the royalty at up to 7% - which is a system wide advertising obligation called the Caesar fund. There are other assorted fees for the pos system, training and other that we will not cover here.

How much could I earn as a Little Caesars franchise owner? Here is a red flag for Little Caesars. Franchises have the option to include financial performance data in their disclosure documents. To show how much their stores are making. Dominos shows what average unit weekly sales are for their stores, Its over $20,000 a week, Pizza Hut lists a ton of great data based on what type of stores, and how mature the store is. Little Caesars however avoids their numbers altogether. Not the end of the world, but a small red flag for sure.

Not all franchises list this data but we like to see it because it shows companies have nothing to hide. Now if we head over to the QSR50 which is a ranking of the top 50 quick serve restaurants they have pegged Little Caesars at $815,000. Which would place their average earnings below Dominos and Pizza Hut.

Now a somewhat larger red flag is what is called item 20, these are stores opened and closed over the past 3 years,. so Dominos very strong growth +176 stores opened in 2016, 225 opened in 2017 and 260 opened in 2018. Pizza Hut opened 105 stores in 2016, 136 stores in 2017 and only 66 stores in 2018. Might be the start of a slowdown for them we'll wait and see their next FDD. And it depresses me that I am actually excited about seeing that. Now Lets look at the growth of Little Caesars. They opened 53 stores in 2016, then closed 13 stores in 2017 and 100 stores were closed in 2018

One franchisee whose story we were following had to close his stores down because he was being forced to sell the corporations obligatory $5 pizza, which in Kansas City was losing him money. Long story short Alan Knox had to shutter 21 of his Kansas City Little Caesars stores after a whole lot of legal action from both sides. The Knoxes were franchisees for 30 years and felt that Little Caesars was completely inflexible. Of course if these stores fail Little Caesars can sell new stores to new owners, not saying that was their motivation. And I'm being overly cautious because it seems little Caesars has quite a few lawyers at their disposal as they have several pages of lawsuits in their FDD, both from them suing franchisees and franchisees suing them.

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