This McAlister franchisee with 30+ years of restaurant experience from Oklahoma is doing well. The article has some good tidbits:
“Our business is actually up,” said Bothwell, attributing that to McAlister’s market positioning and lunch focus, which accounts for 65 percent of its revenue. “People seem to still be eating out for lunch.”Competing for the fast-casual market with such well-established companies as Panera Bread and Jason’s Deli, McAlister’s offers more than 100 menu items for lunch and supper, targeting health-conscious customers.
“We have to get more sales to cover our increased operating costs,” he said, noting his average per-person ticket runs $7.85.
His firm ended 2007 with revenue of $10 million, his stores averaging $1.5 million per year. With eateries to open this year in Shawnee; Lawrence, Kan., and Joplin, Mo., as well as at 21st and Yale in Tulsa, he projects 2007 revenue of $20 million.McAlister’s restaurants established in existing shopping centers, like his new midtown Tulsa deli, cost about $750,000 to open, said Bothwell. Stand-alone stores can run $1.5 million to get off the ground. Both employ an average staff of 50, now a greater challenge since Oklahoma’s new immigration law further drained the state’s tapped labor pool.
UPDATE: May 29, 2008 @ 5:34pm EST
UPDATE #2: June 4, 2008 @ 3:14pm EST
There was an interesting comment to this post about whether a stand alone location can realistically justify the $1.5 million build out costs, which is double the $750,000 cost for a strip mall location. The short answer is yes. You wouldn’t need twice the sales, but there would be an incremental increase in sales to have the free cash flow to service more debt.
Here’s the analysis: The monthly cost of borrowing an additional $750,000 @ 8% with 10-year repayment term is
| Loan Balance: | $750,000.00 |
| Loan Interest Rate: | 8.00% |
| Loan Fees: | 0.00% |
| Loan Term: | 10 years |
| Monthly Loan Payment: | $9,099.57 |
| Number of Payments: | 120 |
| Cumulative Payments: | $1,091,948.32 |
| Total Interest Paid: | $341,948.32 |
To cover this $9,100 in additional monthly debt service not including the extra taxes and maintenance, the store would need to attract an extra 1,160 tickets monthly @ $7.85 average per ticket. A store with $1.5 million in sales is attracting 524 patrons per day. Can a standalone location attract at least 38.6 more people per day versus a strip mall front? Sure, it is possible with a significantly more prominent street exposure.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
How could a stand-alone that costs twice as much be a viable option? I highly doubt a stand-alone would get twice the sales.
You wouldn’t need twice the sales, but there would be an incremental increase in sales to have the free cash flow to service more debt.
$30,400 per month on $750,000 loan @ 8% with 10-year repayment term. To cover that additional debt service, the store would need to attract an extra 3,873 tickets monthly @ $7.85 average per ticket. Can a standalone location attract 130 more people per day versus a strip mall front? Sure, it is possible with a significantly more prominent exposure.
How is $30,400 per month on $750,000 loan @ 8% with 10-year repayment term?
Doit wrote on June 1, 2008 @ 9:57 pm:
Ugh…I used an online loan calculator that was way off. Thanks. Post fixed.