Startup costs and revenues

Qualifications for ownership

Culture fit:

Business ownership experience
Active ownership. Marco’s is not looking for passive investors, though franchise ownership groups that include an operating partner are welcome.

Financial:

1 store = $200,000 liquid capital and $600,000 net worth
2 stores = $300,000 liquid capital and $900,000 net worth
3 stores = $400,000 liquid capital and $1,200,000 net worth
Credit score of 680 or more

Marco's Pizza Revenue

$1,222,684 AUV* for the top 50% of franchised stores in 2022

*Based on the Average Sales Volume of the top 50% of our Franchised Stores for our fiscal year 2022. Based on our fiscal year 2022, 160 of 414 Franchised Stores in the category (or 39%) met or exceeded this average. This information appears in Item 19 of our 2023 FDD – please refer to our FDD for complete information on financial performance. Results may differ. There is no assurance that any franchisee will perform as well.

Sales performance

The following chart provides the average and median Net Royalty Sales on a category and cumulative basis, for the top 25%, 50%, and 75%, and the bottom 25%, 50%, and 75% of the 827 Franchised Stores which were open for business for 52 weeks in 2022. As reflected in the chart below, total average Net Royalty Sales from $945,807 in 2021 to $962,344 in 2022, 7.2% CAGR (compound average growth), and total median Net Royalty Sales increased from $895,523 in 2021 to $911,946, representing 7.5% CAGR.

2022

[wptb id=4739]

[wptb id=4740]

2021

[wptb id=4699]

[wptb id=4700]

Marco's Pizza Startup costs

Total Estimated Initial Investment: $286,852 – $805,927

The high figure assumes substantial rehabilitation costs not normally incurred, and also assumes substantial remodeling of the space, not previously usable by a food business, with little or no work performed or funded by the landlord.

INITIAL FRANCHISE FEE ¹

$25,000

METHOD OF PAYMENT: See Note 1

WHEN DUE: See Note 1

TO WHOM PAID: Us

The Initial Franchise Fee is determined as explained in Item 5 above. For purposes of this table, we have assumed the standard Initial Franchise Fee. If we grant you the right to develop multiple locations, you will pay us the Development Fee at the time you sign the Development Agreement. We will apply a $5,000 credit towards the Initial Franchise Fee due under each related Franchise Agreement. For purposes of this table, we have assumed an initial fee for a two-store development agreement at $5,000 per store to be developed. Obviously, you will pay a smaller fee if the development agreement has fewer stores and a larger fee if the development agreement has more stores. The amounts that you pay to us are not refundable (except in the limited circumstances described in Item 5 above). Your payment obligations to vendors are not likely to be refundable unless you negotiate those arrangements.

REAL PROPERTY ²

$6,000 - $18,666

METHOD OF PAYMENT: See Note 2

WHEN DUE: Monthly

TO WHOM PAID: Landlord

The estimate in the chart is for the space that you will need to operate your Store, through the end of the third month of operation, as described below.

Real estate costs vary widely from place to place, and franchisees have a wide range of options to choose from in selecting a location. Your location must be in a general area that will allow you to provide delivery services efficiently and conveniently to customers in the area you serve. You will need about 1,200 - 1,600 square feet of space for your location.

Commercial rental rates vary rather substantially based upon a wide range of factors. The estimate provided in the table is based on the following factors: (1) that in the current real estate market, you will be able to negotiate a total rent abatement for the build-out period (that is, before your Store opens); (2) that you will pay a one-month security deposit in addition to the three-month period after your Store opens, for a total of four months’ rent; and (3) that you will lease between 1,200 to 1,600 square feet of space for your Store. Stores typically occupy 1,200 to 1,600 square feet of space, and typical annual rate ranges from $15 and $35 or more per square foot.

If you lease a location, you are also likely to incur build-out expenses (see note 5 below). You may also incur real estate broker fees, additional prepayments, “additional rent,” common area maintenance (CAM fees), insurance fees, property taxes, signage fees, operating fees, or other costs, depending on the terms of your lease and the prevailing real estate market in your area.

Most franchisees lease their space. We cannot estimate your costs for buying or leasing land and constructing a building, as these costs vary substantially from market to market, depending on many factors, such as location and the design and construction of the building, as well as fluctuations in the local real estate market.

EQUIPMENT FIXTURES ³

$97,725 - $175,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Opening

TO WHOM PAID: Vendors

Point of Sale Computers ⁴

$19,000 - $21,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Installation

TO WHOM PAID: Vendors (MTS)

We require all new Stores to install an approved “point-of-sale” (POS) and “online ordering” system. The technology environment is rapidly changing, and it is difficult to anticipate the future cost of developing, acquiring, implementing, and licensing POS and related digital technologies, including mobile apps, that may benefit the System. These advancements may result in additional costs of the POS system beyond what is currently being charged by the provider. Presently, we have one approved POS system offered by MTS. MTS also provides the on-line ordering system through third party arrangements. See Franchise Agreement Section 13.15 for additional information on on-line order entry requirements. You may fully pay for the POS system at the time of purchase, or a financing program may be available for the hardware and software cost. This estimate also includes 90 days of software maintenance and support fees at a rate of $449 per Accounting Period, and the cost of security cameras linked through the POS system (which are mandatory with a minimum of 4 cameras).

Credit Card Processing ⁵

$6,175

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Installation/Monthly

TO WHOM PAID: Vendors

We require all Stores to be PCI compliant for credit card transactions processed through the Store. Currently, we have 1 approved model of EMV credit card reader machine, which must be purchased through our approved vendor (see Items 8 and 11). We recommend that you have 2 to 4 EMV credit card readers. The cost estimate includes the cost of 4 EMV credit card reader machines (one for each required order-taking station in the Store), as well as the monthly PCI compliance fee of $4.95 per month, for the first 90 days. If the Store is not PCI compliant, you will pay a non-compliance fee of $19.95 per month, but that amount is not included in the estimate since all stores are required to be PCI compliant. The cost estimate also includes an estimate of $5,500 in merchant fees for the first 90 days of Store operations, which are paid to third party credit card companies and are calculated based on the volume and amount of the credit card transactions processed each month. Merchant fees may vary significantly depending on the credit card company’s rates, mix of cards presented by customers, and other factors. Our estimate is based on the average merchant fees paid by our system over a 3-month period.

Leasehold Improvements ⁶

$65,000 – $400,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Opening

TO WHOM PAID: Vendors; Contractors

You will incur costs for the build-out of your Store, and you must use one of our approved general contractors to complete the work (See Item 8). The high figure assumes substantial rehabilitation costs not normally incurred, and also assumes substantial remodeling of the space, not previously useable by a food business with little or no work performed or funded by the landlord. You may be able to negotiate a construction allowance from the landlord, which may cover a portion of the build-out/leasehold improvement expenses and typically ranges from $0 to $56,000 depending on the size of the space and other relevant factors. The low figure assumes a substantial amount of the work will be performed or funded by the landlord, or that the space is a second-generation restaurant space requiring minimal build-out (which may or may not incur impact fees). Some landlords prefer to offer a free-rent period in lieu of a construction allowance; this is also negotiable. Some landlords may offer neither a construction allowance nor a free-rent period. This amount includes the estimated cost of building permits, and an estimated cost of $20,000 to $30,000 for impact fees assessed by the local regulatory authority or private entity. Each locality assesses its own impact fees, and as a result the amounts may vary widely. The estimate provided represents our historical experiences. We assume you will negotiate with the landlord to cover some or all of the impact fees for you.

Signage

$3,000 - $15,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Opening

TO WHOM PAID: Vendors; Contractors

Opening Inventory ⁷

$7,000 - $11,000

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Before Opening

TO WHOM PAID: Suppliers

Small Supplies ⁸

$14,200 - $18,500

METHOD OF PAYMENT: Lump Sum

WHEN DUE: See Note 7

TO WHOM PAID: Suppliers; Us

Deposits, Pre-Paid Expenses ⁹

$2,500 - $6,000

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Before Opening

TO WHOM PAID: Suppliers; Utilities

Business Licenses ¹⁰

$500 - $3,000

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Before Opening

TO WHOM PAID: State & Local Agencies

Insurance ¹¹

$2,366 – $16,500

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Opening

TO WHOM PAID: Insurance Company

Insurance costs may vary in different localities. The estimate is for initial amounts paid in the first 90 days. If you have employees, you must maintain adequate workers' compensation and liability insurance. The requirements and rates for workers’ compensation insurance vary widely from place to place. We reserve the right to require additional types of insurance and coverage as provided under the Franchise Agreement. See Item 8 for our insurance requirements.

During training, you must obtain workers' compensation insurance on yourself and on all personnel undergoing training at our facilities. You must also have the insurance coverage outlined above in effect at the beginning of the training period, and maintain it throughout your training. You will not be allowed to begin training until you have given us proof of insurance coverage.

Training Expenses ¹²

$3,150 - $10,150

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Opening

TO WHOM PAID: Employees, Hotel, etc.,

This estimate does not include additional training fees, which would apply if you decide to send more than 1 person to the initial training course (see Item 6). For training requirements in general, see Item 11. These costs would be paid to other suppliers such as hotels and airline companies if you were traveling. The estimate includes a non-refundable training registration fee of $200 per person to cover incidental costs of administering the training, such as printed materials, meals during the training sessions, and behavioral assessments.

Miscellaneous Expenses ¹³

$500 - $5,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: As Required

TO WHOM PAID: Suppliers; Employees

“Miscellaneous expenses” includes a variety of other costs. Legal expenses would be a miscellaneous expense included in this cost estimate. In some cases, you may need assistance from others in helping to obtain financing for your Store. The amount of that assistance may depend on the amount of your loan and may run as high as 3% of your financed amount (or more in some circumstances). In addition, if your financing must be guaranteed by the SBA (Small Business Administration), the SBA may require you to pay a 3% guarantee fee.

Architectural & Engineering ¹⁵

$8,000 - $15,000

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Before Opening

TO WHOM PAID: Professionals

You will be required to obtain a site survey, professional blueprints and engineering drawings for your Store and in most cases to obtain construction permits, food service permits, and other required permits. You must only use an architect approved by us in advance. Presently, we have one approved architect for use (See Item 8). We will review and approve the base line drawings and the final blueprints in order to ensure compliance with the System. You will be responsible for all architectural, engineering and similar fees.

Technology Fee ¹⁶

$336

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Before Opening

TO WHOM PAID: Us

Delivery Area, streets database for POS, and shape files for POS and OLO platform Maps

$500

METHOD OF PAYMENT: Lump Sum

WHEN DUE: Upon commencement of Store construction

TO WHOM PAID: Us

Brand Launch Program ¹⁷

$15,500 - $25,500

METHOD OF PAYMENT: Lump Sum

WHEN DUE: See Note 17

TO WHOM PAID: Us

The total cost of the Brand Launch Program is $15,500 and covers the expected costs of marketing efforts related to your Store’s initial opening. You will pay this amount to us in full when you start construction on your Store. If, within 8-12 Accounting Weeks of the Store’s opening date, the Net Royalty Sales for the Store on a weekly basis do not achieve at least (a) 90% of the Average Weekly Sales for the DMA in which the Store is located, or (b) 90% of the Average Weekly Sales for the System, whichever is lower, then we will evaluate the operational and marketing performance of the Store and develop an improvement plan which may include (in our sole discretion) a requirement for Franchisee to spend an additional amount up to $10,000 (for a total maximum required expenditure of $25,500) in additional marketing and advertising for the Store which has been approved in advance by Franchisor. You will pay these additional sums directly to the vendors. For this purpose, “Average Weekly Sales” shall be determined as the weekly average of the sales for all Marco’s Pizza® stores in the DMA or the System (as applicable) for the preceding 13 Accounting Periods. All marketing must be approved by us. Stores that relocate or are re-openings of formerly closed Stores are also required to participate in the Brand Launch Program, but we may require specialized marketing programs for those grand openings.

Store Technology Infrastructure System ¹⁸

$800 - $2,400

METHOD OF PAYMENT: As Incurred

WHEN DUE: As Required

TO WHOM PAID: Suppliers

The total cost of the Store Technology Infrastructure System is for a basic configuration of SDWAN (software defined wide area network), which includes high-speed internet service with hardware, installation, and ongoing maintenance and service. SDWAN provides increased data security, Wi-Fi and issue/connectivity management tools, and other benefits. The estimate is for initial costs to be paid in the first 90 days and a one-time installation and set-up fee of $30-$600. The actual cost may vary depending on the availability of these services in your Store’s particular region. You must purchase this system through one of our approved vendors. Depending on the Store site, you may incur costs to run the necessary internet access capabilities to the site. Our approved technology vendors may cover a portion of such expenses up to $6,000, and you may be able to negotiate with the landlord to cover all or a portion of any remaining associated expenses.

Menu Boards ¹⁹

$600 - $1,200

METHOD OF PAYMENT: As Incurred

WHEN DUE: Before Installation

TO WHOM PAID: Vendors

Additional Funds ¹⁴

$9,000 - $30,000

METHOD OF PAYMENT: As Incurred

WHEN DUE: As Required

TO WHOM PAID: Suppliers; Employees

We require you to have a minimum of $9,000 in working capital available when your Store opens for business and all expenses are paid. This is an estimate only of the amount of funds you may need for start-up and additional payroll expenses you may incur, and your start-up expenses may be higher or lower. The actual amount of additional funds you will need depends on a variety of factors, including the type of community in which you open your Store, the size of your advertising area and delivery territory, the time of year when you open your Store, your own management skill, economic conditions, competition in your area, and other factors. We relied on our experience in working with our predecessor and our franchisees in compiling these working capital estimates.

TOTAL

$286,852 – $805,927

Discounts and Incentives

Marco’s Pizza offers discounts and incentives to qualifying military veterans, first responders and multi-unit investors.

VETERANS

We currently discount the Initial Franchise Fee as follows:

$15,000 for qualified U.S. veterans; and
Initial Franchise Fee waived in its entirety for qualified US veterans with a 50% or more military service-connected disability rating.

The military discounts are available to veterans who have received a discharge (other than dishonorable) as well as any active-duty personnel. If the franchisee is a corporation, partnership, limited liability company, or other legal entity, the veteran participant must maintain at least 51% ownership interest in the entity to qualify for this discount. To apply for the discount, you must provide us a copy of form DD-214, reflecting your military status, before the Franchise Agreement is signed.

FIRST RESPONDERS

We currently discount the Initial Franchise Fee to $20,000 for qualified first responders (firefighters, paramedics, law enforcement officers, and other positions as we may determine) with 5 or more years of service. If the franchisee is a corporation, partnership, limited liability company, or other legal entity, the first responder participant must maintain at least 51% ownership interest in the entity to qualify for this discount.

GROWTH INCENTIVE

Multi-Unit Franchisees (New): We currently discount the Initial Franchise Fee on new Store development for qualified first-time Marco’s franchisees, based on the total number of franchises initially purchased, as described below:

2 Stores - $17,500 per each new Franchise Agreement
3 Stores - $16,600 per each new Franchise Agreement
5 Stores - $15,000 per each new Franchise Agreement, plus a temporary Royalty Fee reduction to 4.5% for the first 52 Accounting Weeks following each Store opening if 4 or more open within 12 months of signing.

Multi-Unit Franchisees (Existing): We currently discount the Initial Franchise Fee on new Store development for qualified existing franchisees, based on the total number of Stores they own which are open and in continuous operation, as described below:

3-4 Stores: $20,000 per each new Franchise Agreement
5-10 Stores: $15,000 per each new Franchise Agreement
11 or more: $10,000 per each new Franchise Agreement

The participant must meet our financial, creditworthiness, and operational criteria and be approved by us to open each Store. If the franchisee is a corporation, partnership, limited liability company, or other legal entity, the qualifying participant must maintain at least 50% ownership in the entity, as well as the qualifying existing Stores, to qualify for this program, and the franchisee must comply with program requirements. Growth Acceleration: We currently offer a rebate on the Initial Franchise Fee to franchisees who open 4 or more Stores within a single 12-month period. The rebate is equal to 25% of the Initial Franchise Fee actually paid to us on the qualifying units only. Franchisees must submit a request in writing to us in order to receive the rebate.

Startup costs and revenues

Qualifications for ownership

Culture fit:

Financial:

Marco's Pizza Revenue

Marco's Pizza Startup costs

INITIAL FRANCHISE FEE 1

$25,000

REAL PROPERTY 2

$6,000 - $18,666

EQUIPMENT FIXTURES 3

$97,725 - $175,000

Point of Sale Computers 4

$19,000 - $21,000

Credit Card Processing 5

$6,175

Leasehold Improvements 6

$65,000 – $400,000

Signage

$3,000 - $15,000

Opening Inventory 7

$7,000 - $11,000

Small Supplies 8

$14,200 - $18,500

Deposits, Pre-Paid Expenses 9

$2,500 - $6,000

Business Licenses 10

$500 - $3,000

Insurance 11

$2,366 – $16,500

Training Expenses 12

$3,150 - $10,150

Miscellaneous Expenses 13

$500 - $5,000

Architectural & Engineering 15

$8,000 - $15,000

Technology Fee 16

$336

Delivery Area, streets database for POS, and shape files for POS and OLO platform Maps

$500

Brand Launch Program 17

$15,500 - $25,500

Store Technology Infrastructure System 18

$800 - $2,400

Menu Boards 19

$600 - $1,200

Additional Funds 14

$9,000 - $30,000

TOTAL

$286,852 – $805,927

Discounts and Incentives

Let's get rolling

Let's get rolling

INITIAL FRANCHISE FEE ¹

REAL PROPERTY ²

EQUIPMENT FIXTURES ³

Point of Sale Computers ⁴

Credit Card Processing ⁵

Leasehold Improvements ⁶

Opening Inventory ⁷

Small Supplies ⁸

Deposits, Pre-Paid Expenses ⁹

Business Licenses ¹⁰

Insurance ¹¹

Training Expenses ¹²

Miscellaneous Expenses ¹³

Architectural & Engineering ¹⁵

Technology Fee ¹⁶

Brand Launch Program ¹⁷

Store Technology Infrastructure System ¹⁸

Menu Boards ¹⁹

Additional Funds ¹⁴