Dave’s Hot Chicken Franchise by Vetted Biz

Written by: Tyler Morris
Last Updated by Maria Fernandez Amato: October 28, 2022
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Dave’s Hot Chicken is a chicken-themed restaurant with various unique recipes. The menu revolves around Nashville-themed hot chicken in a fast-casual environment. The brand first started as a stand in a West Hollywood parking lot. This is where four best friends Dave Kopushyan, Arman Oganesyan, Tommy, and Gary Rubenyan began their chicken dream. Dave was a trained chef in French Cuisine and was committed to making their chicken dream a reality.

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William Phelps has served as the Chief Executive Officer since the company’s inception. Phelps previously served as the director of Blaze Pizza LLC and has years of experience in the Food and Beverage industryDave’s Chicken currently has 61 locations and has 3 more opening by the end of May 2022. Dave’s Hot Chicken has also sold over 500 franchise agreements and expects to open an additional 75 locations this year! Kris Humphries, a former NBA star, has committed to opening 10 franchise locations himself.

How's Dave's Hot Chicken Franchise Positioned in the Food and Beverage Industry?

The Food and Beverage Industry makes up 36% of all franchises. This makes it the largest industry in the franchise sector. It accounts for roughly 5% of the U.S. gross domestic product. Furthermore, it has annual sales of $1.4 Trillion. The industry standard for royalty fees is 5.3% and 2.3% marketing fees. Despite the significant number of food and beverage franchises, there is a 19.17% failure rate.

Dave’s Hot Chicken royalty fee is on par with the industry norm of 5%. The marketing fee is currently 2%, but it is subject to be increased to 3%. Key competitor, Kentucky Fried Chicken has a royalty fee of between 4-5% and a marketing fee of 4.5%. To open a KFC you can expect to pay $1.01 – $2.77 million. In addition, Chick-Fil-A has the highest royalty fee in the industry at 15%. This indicates that Dave’s Hot Chicken is well-positioned against key competitors.

chicken franchise

How Much Does a Dave's Hot Chicken Franchise Cost?

The investment cost to open a Dave’s Hot Chicken ranges from $585,800 – $996,500. Although a non-traditional Dave’s Hot Chicken with both sitdown and drive-through typically ranges between $2,543,215, and $11,267,015. When compared to KFC and other key competitors Dave’s Hot Chicken comes in at the moderate side of an initial investment. This means that it is well-positioned within the industry when opening a location.

Single Dave’s Hot Chicken Restaurant

Type of Expenditure Amount – Low Amount – High
Initial Franchise Fee $30,000 $30,000
Architect/Engineer $14,800 $20,000
Business Licenses and Permits $1,000 $10,000
Construction, Remodelling and Leasehold Improvements $295,000 $457,000
Equipment $144,000 $250,000
Furniture, Fixtures and Decorations $11,500 $29,000
Smallwares $7,500 $9,500
Signage $5,000 $19,500
Graffiti and Artwork $12,000 $20,000
Grand Opening Kit, Menu Boards $6,000 $8,000
Computer Equipment and Information/POS Systems $13,500 $19,500
Office Supplies $1,000 $3,000
Uniforms $1,200 $2,500
Initial Inventory and Supplies $7,000 $14,000
Insurance Deposits $1,500 $2,500
Liquor Licensing $0 $10,000
Pre-Opening Rent $5,000 $10,000
Initial Training $10,000 $20,000
Pre-Opening Advertising $1,500 $3,000
Miscellaneous Opening Costs $1,000 $5,000
Professional Fees $1,000 $10,000
Additional Funds – 3 Months $16,300 $44,000
TOTAL ESTIMATED INITIAL INVESTMENT $585,800 $996,500

Dave's Hot Chicken Franchise Requirements

There is a $30,000 initial franchise fee and $280,000 if an investor decides to open 26 locations. Additionally, there is a minimum net worth requirement of $250,000 – $500,000 to open a Dave’s Hot Chicken franchise. A higher net worth and hoping to open more than one location is also a great strength when hoping to open a Dave’s Hot Chicken franchise.

Additionally, Dave’s Hot Chicken expects liquid cash to be at least $100,000.

Franchisees are expected to be directly involved in their locations.

Finally, Dave's Hot Chicken also desires experience in restaurant operations or management prior to opening a location

Ongoing Fees

  1. Royalty Fee: 5%
  2. Marketing Fee: 2-3%
  3. Insurance Costs
  4. Certification Training: $2,500 per manager
  5. Technology Fee:
    1. $1,200 initially
    2. $750 per month thereafter
  6. Mystery Shopper Fee: $125 per month
  7. Location Lease: Varies

How Much Do a Franchise Owners Make?

Although Dave’s Hot Chicken does not provide unit level profit, we estimate the following:

Expected Revenue: $1,490,000

Expected Profit Margin: 15%

Annual Profit: $223,000

It takes 7 Years to recoup for high investment. And 4.25 Years to recoup low investment.

As seen above, it can take between 4.25–7 years to recoup your investment. It all depends on where your franchise is in relation to cost to open and annual revenue/

Item 19/online information does not include expected revenue
chicken franchise

Is the Franchise Profit Worth the Franchise Cost?

If the business is sold in year 5, you will most likely earn a profit, meaning that it is worth it to invest and open a Dave’s Hot ChickenA Dave’s Hot Chicken franchise owner should be able to sell their franchise for $2.49M. If you own multiple franchises the profitability chances increase significantly. The business valuation for this type of chicken franchise is usually priced at 1.67-time revenue (calculations below):

$2,491,710.14 = $1,492,042 -1.67

Dave’s Hot Chicken Income Statement:

January 3, 2021 January 5, 2020
ASSETS
Current Assets
Cash and cash equivalents $6,127,681 $1,911,112
Accounts receivable, net 125,243 17,281
Inventories 14,810
Prepaid expenses and other current assets 23,311 10,492
Total current assets 6,291,045 1,938,885
Property and Equipment, net 1,264,865 31,267
Deposits and Other Assets 76,418 5,347
Total assets $7,632,328 $1,975,499
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses $1,164,281 $105,776
Deferred revenue, current 450 278
Total current liabilities 1,164,731 106,054
Deferred Revenue, net of current portion 2,753,243 97,592
Paycheck Protection Plan Note Payable 223,105
Total liabilities 4,141,079 203,646
Commitments and Contingencies
Members’ Equity 3,491,249 1,771,853
Total liabilities and members’ equity $7,632,328 $1,975,499

Dave’s Hot Chicken Franchise CO., LLC STATEMENTS OF OPERATIONS For the Years Ended January 3, 2021 and January 5, 2020 and For the Period from December 26, 2018 (inception) to December 31, 2018

January 3, 2021 January 5, 2020
REVENUES
Royalties $765,150 $79,690
Franchise fees 364,678 62,130
Advertising fund fees 267,742 31,876
Management fees 67,214 6,377
Store sales 1,434,806
Total revenues 2,899,590 180,073
COST OF REVENUES, FRANCHISE FEES 248,487 9,823
COST OF REVENUES, STORE 486,089
GROSS PROFIT 2,165,014 170,250
OPERATIONAL EXPENSES
Marketing and advertising expenses 267,742 31,876
Professional fees 780,035 451,240
Selling, general and administrative 4,541,860 514,481
Total operational expenses 5,589,637 997,597
LOSS FROM OPERATIONS (3,424,623) (827,347)
OTHER INCOME (EXPENSES)
Interest income 800
Interest expense (1,553)
Loss on disposal of assets (288)
Taxes and fees (8,079) 800
Total other expenses (9,120) 800
NET LOSS $(3,433,743) $(828,147)

Cash Flow Statement 1/4/2021 – 4/4/2021

Operating Budget Variance
Net Income/Loss
Net Income -788,894 -1,262,468 473,575
Depreciation & Amortization Expense
DEPRECIATION EXPENSE 45,484
CURRENT ASSET & LIABILITY 82,150
Total Cash Flow From Operating Activities -661,259
Investing
Long Term Assets
CAPITAL EXPENDITURES -708,591 -785,000 76,409
SECURITY DEPOSIT-RENT -44,401
Total Cash Flow From Investing Activities -752,992
Financing
Long Term Liabilities
DEFERRED RENT LIAB-CURRENT 19,002
DEFERRED FRANCHISE FEE 833,800 472,700 361,100
Total Cash Flow From Financing Activities 852,802
Cash Net Change -540,724
Cash Beginning Balance 6,127,681
Calculated Cash Ending Balance 5,566,230 4,574,861 991,369

Income Statement

Dave’s Hot Chicken Franchise taking on significant debt as an organization may appear alarming. However, the company is attempting to grow and expand rapidly. This means that it is a young company that will have national brand recognition and distribution in the coming years.

Furthermore, recently starting franchise agreements to grow to over 500 locations nationwide demonstrates that the brand will explode soon. They currently have over 60 locations after only a few years in operation. Additionally, the company sees healthy revenues from franchises and ongoing marketing fees.

How Many Dave's Hot Chicken Have Opened and Closed?

Dave’s Hot Chicken once again will have over 64 locations by the end of May 2022! Hoping to grow to over 500 locations, while ambitious, will allow it to compete against major brands within this industry including Chick-Fil-A and KFC. Dave’s Hot Chicken has not yet closed a single location!

Conclusion

Given the popularity of chicken-themed fast-casual restaurants, we can expect Dave’s Chicken to flourish. This space is competitive given Chicken Guy, KFC, Chick-Fil-A, and numerous other franchises attempting to cash in on the industry. Regardless, Dave’s Hot Chicken franchises are expected to be an incredible opportunity, with tremendous potential.