Experience with Pizza Hut Franchise

[Venkat]

Hi All,

this is my First post and i'm working as a software consultant and owning up a business is life time dream..

I have been thinking of opening up a Pizza Hut Franchise....

I looked on internet but i couldn't find anywhere what would be the margins of profit of sales...

I would appreciate if some one of you either own or know some one who owns a pizza hut franchise to share some info ...

You can reach me at saphana81@gmail.com if you want to share contact details

Thanks again.. Looking forward for valuable advice

Venkat

[Fulcrum]

Before trying to find out what your margins will be, you might be better served finding out if Pizza Hut is expanding in your area.
Check Pizza Hut Franchise : Fast Food Franchise : Best Pizza Franchises : Pizza Restaurant : Franchise for Pizza Hut (http://www.pizzahutfranchise.com) to find out.

[PayForWords]

In all honesty, Pizza Hut is a great franchise to get your hands on IF...

You get one in a moderately sized area (50K people or less) that doesn't already have one.

Those (from what I've seen) are the most successful.

As far as the profit margins, I'm not sure.

[Venkat]

Thanks Fulcrum and PayForWords

I have already looked at what you have said but wanted to find out margin of profits ....

Say if i sell a $10 pizza how much would be expense for Raw material etc and how much i will make after all the deductions .. I wanted to know this kind of info...

I would appreciate if you could share this info

[Patrysha]

It will depend on your particular costs and who you have to order from...the franchise ought to have that information in their prospect packs I would imagine.

I just finished the massive task of costing out the menu at the restaurant I work at so that we could work on menu engineering. If you send me the recipe, I can work out the cost to give you a general idea of what it would cost for the food...but that won't work to tell you anything other than the direct costs...it won't include your labour, rent, utilities, insurance, marketing etc that will determine the real amount that you would be profiting...

[PayForWords]

"Pizza Hut franchise is part of YUM! Brands and to be considered for a Pizza Hut franchise you will need to have $360,000 in cash and net worth of $1 million. Your total estimated initial investment will be between $1,290,000 and $3,088,000. Usually a Pizza Hut franchisee reports about 15% profit of the total sale which is to the tune of $700,000 to $800,000 per year. " - FranchiseWisdom.com




Hope that helps somewhat.

[Fulcrum]

Venkat,

The reason I didn't dig for margins is because I found that link. After reading through Pizza Hut's requirements and timeline, and noticing that margins are available upon request during this due diligence process, I feel that you should be more concerned with meeting their net worth and liquidity requirements as well as whether or not they are expanding in an area you can serve. I don't know if you meet these standards or not (and I don't need to know), but if you have the capacity then you may be better off beginning the process rather than trying to figure it all out first and run the risk of losing the opportunity through "paralysis of analysis".

[Paul]

Hi All,

this is my First post and i'm working as a software consultant and owning up a business is life time dream..

I have been thinking of opening up a Pizza Hut Franchise....

I looked on internet but i couldn't find anywhere what would be the margins of profit of sales...

I would appreciate if some one of you either own or know some one who owns a pizza hut franchise to share some info ...

You can reach me at saphana81@gmail.com if you want to share contact details

Thanks again.. Looking forward for valuable advice

Venkat


Generally speaking Pizza Hut isn’t usually the best choice for your first franchise. Franchises in that price range aren’t really designed for “owner operator”, unless the operator is already experienced in restaurants. Like McDonalds and Burger King it’s more of an investment, with other people running it. It can be a complex situation with land leases etc.

Don’t look at it as a business opportunity; look at it as an investment opportunity.

You may want to look at a smaller food or pizza franchise operation as your first business. Learn your away around the food business first.
Learn about typical food margins, and other business ratios. Typically cost of goods is 28 to 32% Labor around 33% rent about 10% then overhead expenses (energy, maintenance), royalty percentage leave a fairly slim margin. It’s not just about how much you make per pizza.

For better information, as was suggested, you can contact the company and request their FDD (Franchise Disclosure Document).

[PayForWords]

I forgot to mention this BUT I remember hearing a while back that...


Dominos employees could franchise a store for around 10,000 dollars?


Not sure if that still applies anymore but it's just a thought.

[ang@brisbane]

I don't know how applicable this is over here but in Australia franchisees are going to the wall largely due to an enforced $4.95 pizza war between Dominoes and Pizza Hut. The franchisees took YUM the parent company to court but so far have lost the first round. The law isn't concerned with equity so much as the fine print. YUM claims that gross sales have increased but only marginally and profits have fallen to such an extent owners want out but are having trouble finding buyers. Add to this the further loss of sales from all the new stores encroaching on your territory and your franchise becomes an unsustainable nightmare. It actually costs the owner money to sell $4.95 pizzas. I personally know ex-owners who are now bankrupt and have lost their home. The set-up and ongoing costs are horrendous. $300,000 to $400,000 for the store, royalties and franchise fees, equipment malfunction repairs, rent, wages, which all range in the thousands. The biggest myth is due diligence. Franchisees are often blamed when things go bad but how do you buy a franchise with both eyes open when the really meaningful statistics are hidden? Pizza Hut doesn't disclose profit and loss figures of the stores. You have to phone stores individually to find out, and good luck doing that. Owners weren't prepared for the franchisor hobbling the franchisee through this $4.95 "promotion" which is now set to become permanent. I hope this provides a warning for anyone considering a franchise, not just a pizza hut franchise. You are at the mercy of people who are ruthless in the extreme.

[Fulcrum]

I don't know how applicable this is over here but in Australia franchisees are going to the wall largely due to an enforced $4.95 pizza war between Dominoes and Pizza Hut. The franchisees took YUM the parent company to court but so far have lost the first round. The law isn't concerned with equity so much as the fine print. YUM claims that gross sales have increased but only marginally and profits have fallen to such an extent owners want out but are having trouble finding buyers. Add to this the further loss of sales from all the new stores encroaching on your territory and your franchise becomes an unsustainable nightmare. It actually costs the owner money to sell $4.95 pizzas. I personally know ex-owners who are now bankrupt and have lost their home. The set-up and ongoing costs are horrendous. $300,000 to $400,000 for the store, royalties and franchise fees, equipment malfunction repairs, rent, wages, which all range in the thousands. The biggest myth is due diligence. Franchisees are often blamed when things go bad but how do you buy a franchise with both eyes open when the really meaningful statistics are hidden? Pizza Hut doesn't disclose profit and loss figures of the stores. You have to phone stores individually to find out, and good luck doing that. Owners weren't prepared for the franchisor hobbling the franchisee through this $4.95 "promotion" which is now set to become permanent. I hope this provides a warning for anyone considering a franchise, not just a pizza hut franchise. You are at the mercy of people who are ruthless in the extreme.

Even though an old post, I think this does apply.

I disagree with your statement "the biggest myth is due diligence". I don't know much about franchises (hoping some of our members that do will chime in here), but the only thing the franchisees have in stopping this is the actual franchise agreement.

Here in Canada, Tim Hortons (large coffee chain that beats Starbucks) centralized their baked goods production to reduce their (parent company) costs. Individual owners fought this change as they noticed a hit in their profits, and if memory serves me correct the individual store owners won.

Sears Canada didn't honor territorial rights when filling online sales. Corporate was forced to either buy back franchises or face some massive lawsuits.

I only put these two examples up to offer hope to your friends/acquaintances. Yes we're in two different countries, but you never know what will happen when contracts/agreements are brought into court.