Paris Baguette franchise is a global baguette, croissant, cake in bread, and confectionary chain. Despite the French name, Paris Baguette is headquartered in Seoul, South Korea. The franchise is run by Cho Sang-ho and is the #1 bakery chain in South Korea. They have 94 stores in the USA as of the start of 2021.
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How is Paris Baguette Franchise Positioned in the Food and Beverage Industry?
The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. Around 1.46 million people are employed in this industry. Food franchises make up to 36% of the total franchise establishments in the USA, and it is expected to create 1.6million more jobs by 2027.
The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.
Paris Baguette competes in the Food and Beverage industry with brands like Aroma Espresso Bar, Illy, etc. It also competed with local bakeries and cookshops.
How Much is a Paris Baguette Franchise?
The initial Paris Baguette Franchise Fee is $50,000. You have to pay this upfront fee when opening a Paris Baguette franchise.
Paris Baguette Franchise Cost
The estimated total investment necessary to begin the operation of a Paris Baguette Franchise ranges from $635,765 to $1,693,600. The following costs are part of the upfront costs included in the initial investment for a Paris Baguette. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Paris Baguette franchise in 2020.
Estimated Initial Investment
Estimated Initial Investment
| TYPE OF EXPENDITURE | AMOUNT-LOW | AMOUNT-HIGH | TO WHOM PAYMENT IS MADE |
|---|---|---|---|
| Initial Franchise fee | $50,000 | $50,000 | Us |
| Real Estate or Advance Rent and Security Deposit and other Prepaid Expenses and Costs | $10,000 | $60,000 | Landlord or Real Property Owner |
| Building Costs/Leasehold Improvements | $250,000 | $1,000,000 | Third Parties (Your landlord, Architect and/or Contractor) |
| Equipment and Fixtures | $165,156 | $240,000 | Us or Approved Suppliers |
| Signs | $19,500 | $49,000 | Approved Suppliers |
| Smallwares | $15,500 | $25,000 | Us or Approved Suppliers |
| Point of Sale System, Software and Surveillance Equipment | $7,500 | $14,000 | Us or Approved Suppliers |
| Opening Inventory | $36,000 | $48,000 | Us or Approved Suppliers |
| Grand Opening Promotion | $10,000 | $10,000 | Us |
| Licenses, Permits, Fees and Deposits | $4,510 | $18,710 | Municipalities, utility companies or Lessor |
Estimated Initial Investment
Estimated Initial Investment
| TYPE OF EXPENDITURE | AMOUNT-LOW | AMOUNT-HIGH | TO WHOM PAYMENT IS MADE |
|---|---|---|---|
| Miscellaneous Expenses | $11,159 | $16,500 | Us or Vendors and Approved Suppliers |
| Insurance | $3,405 | $4,890 | Insurance Provider and Broker/Agent |
| Attorneys’ Fees and Business Consultants | $3,045 | $7,500 | Attorneys, Accountants, Business Advisors |
| Travel and Living Expenses While Training | $20,000 | $50,000 | Airlines, Rental Car Agencies, Cafés, Hotels, etc. |
| Additional Funds for First 3 Months of Operation | $30,000 | $100,000 | Us, Third Parties and Employees |
| TOTAL | $635,765 | $1,693,600 |
Franchise Requirements
To start a Paris Baguette location, you need a net worth of at least $1.5 million with $500,000 in liquid assets.
Ongoing Fees
Royalty: 5% of weekly Gross Sales
Marketing Fee: 2% of weekly Gross Sales
Local Marketing: 1% of weekly Gross Sales
These fees are very close to the industry standard, with the average royalty being 5.3% and the average marketing fee being 2.3%.
How much do Paris Baguette franchise owners make?
AVERAGE SALES (ALL REPORTED OUTLETS)
FOR JANUARY 1, 2020, THROUGH DECEMBER 31, 2020
| Subset | Total No. of Cafés | Average Sales | Percentage of Cafés at or above Average | Number of Cafés at or above Average | Median | Highest | Lowest |
|---|---|---|---|---|---|---|---|
| Company-Owned Cafés | 30 | $1,693,884 | 50% | 15 | $2,165,466 | $3,509,758 | $368,030 |
| Franchised Cafés | 40 | $1,528,459 | 48% | 19 | $1,476,649 | $2,610,685 | $640,790 |
| Company-Owned and Franchised Cafés | 70 | $1,599,355 | 47% | 33 | $1,528,360 | $3,509,758 | $368,030 |
2020 Paris Baguette Median Franchise Sales : $1.47 million
| Initial Investment (midpoint) | %Profit Margin of Average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $1,164,682 | 10% | $152,875 | 10.25 years |
| $1,164,682 | 15% | $229,313 | 7.75 years |
| $1,164,682 | 20% | $305,751 | 6.5 years |
AVERAGE SALES (ALL REPORTED OUTLETS)
FOR JANUARY 1, 2021, THROUGH DECEMBER 31, 2021
| Subset | Total No. of Cafés | Average Sales | Percentage of Cafés at or above Average | Number of Cafés at or above Average | Median | Highest | Lowest |
|---|---|---|---|---|---|---|---|
| Company-Owned Cafés | 21 | $2,598,537 | 43% | 9 | $2,461,304 | $5,255,056 | $1,358,299 |
| Franchised Cafés | 53 | $2,104,579 | 53% | 28 | $2,135,361 | $3,612,336 | $704,623 |
| Company-Owned and Franchised Cafés | 74 | $2,244,757 | 49% | 36 | $2,225,991 | $5,255,056 | $704,623 |
2021 Paris Baguette Median Corporate & Franchise Sales: $2.13 million
| Initial Investment (midpoint) | %Profit Margin of Average franchise sales | Estimated Profits | Time to recoup investment |
|---|---|---|---|
| $1,164,682 | 10% | $213,536 | 8 years |
| $1,164,682 | 15% | $320,304 | 6 years |
| $1,164,682 | 20% | $427,072 | 5.25 years |
Based on the median sales provided by Paris Baguette’s franchise locations, at an average of a 15% profit margin, it will take around 6 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin, which would elongate getting a return on your investment.
Many factors affect the sales, costs and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other bakeries and baked goods stores; the extent of market penetration and brand awareness that Paris Baguette stores have attained in your market. Also, the quality of management and service at your Franchised Store are factors.
Is the Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Paris Baguette franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $1 Million Net Sales
- Estimated Selling Price = Net Sales – 0.44
When you go to sell a Paris Baguette franchise based on the multiple of .44 and net sales averaging between 2020 and 2021 of $1,877,374, it would sell for $826,044. This is significantly lower than the midpoint investment of $1,164,682.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Paris Baguette (Franchisor) Income Statement Key Insights
Statements of Income (Operations)
Years ended December 31, 2021, and 2020
Other Income (expense)
| – | 2021 | (Restated) 2020 |
|---|---|---|
| Revenue | $25,203,632 | $19,940,411 |
| Cost of revenue | $19,124,622 | $16,885,685 |
| Gross Profit | $6,079,010 | $3,054,726 |
| Selling, general and administrative expenses | $4,872,766 | $5,502,099 |
| Operating Income (loss) | $1,206,244 | ($2,447,373) |
| Other Income | $62,762 | $224,668 |
| Other Expenses | ($408,564) | – |
| – | ($345,802) | $224,668 |
| Income (loss) before income tax expenses | $860,442 | ($2,222,705) |
| Income tax expenses | $41,343 | – |
| Net income (loss) | $819,099 | ($2,222,705) |
Paris Baguette is a profitable business for the franchisor with retained earnings of $819,099 in 2021 compared to $2.2 million is losses in 2020. However, their financials remain to be proven.
How many Paris Baguette units have opened and closed?
Systemwide Outlet Summary
| Outlet type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 26 | 38 | +12 |
| 2020 | 38 | 52 | +14 | |
| 2021 | 52 | 68 | +16 | |
| Company-Owned | 2019 | 49 | 44 | -5 |
| 2020 | 44 | 34 | -10 | |
| 2021 | 34 | 26 | -8 | |
| Total Outlets | 2019 | 75 | 82 | +8 |
| 2020 | 82 | 86 | +5 | |
| 2021 | 86 | 94 | +8 |
Over the last three years, the company has been expanding. Company-owned stores are closing, but franchised locations are increasing. Between 2019 and 2021, their outlets grew from 26 to 94, a 260% increase.
Conclusion
Paris Baguette offers people the opportunity to be a part of a business that has high gross annual sales and a franchisor that has a strong global presence.
While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Food and Beverage Industry.
