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 industry. Dave’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.
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
- Royalty Fee: 5%
- Marketing Fee: 2-3%
- Insurance Costs
- Certification Training: $2,500 per manager
- Technology Fee:
- $1,200 initially
- $750 per month thereafter
- Mystery Shopper Fee: $125 per month
- 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
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 Chicken. A 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.
