Currently developing the Scottish market, Papa John’s has recently opened premises in Edinburgh and Glasgow and is also expanding in the Kilmarnock area. Its new-look stores compete with more established names like Pizza Hut and Domino’s Pizza. Competition is fierce and that means a lot of hard work for potential franchisees.
The first hurdle for prospective franchisees is the interview process, which includes three stages: an initial telephone interview to ascertain suitability and solvency of applicants; an informal meeting and presentation of factual details including an outline of potential working hours and staffing requirements; and a more formal gathering to discuss site positioning and to release paperwork, including a legal/franchise agreement and a business plan template to present to the bank.
“We always advise the applicant gets legal advice at this stage,” says Paul Youngman, business development manager at Papa John’s. “We also ask for a small deposit of £5,000.”
Solvency is important: franchisees must be able to provide about £65,000 upfront: a third of the overall cost of a ‘unit’, which is £200,000. That investment covers the premises, fittings, shop front, a bespoke EPoS (electronic point of sale) system, tills and initial training for the franchisee and general manager. Shop staff will receive training during the opening period, held one week before and one week after. The price also includes a 10-year licence (the licence fee is £18,500). On renewal, franchisees are liable to pay the full licence amount again at whatever the market rate happens to be.
Papa John’s operates a comprehensive marketing and PR campaign for all stores. Launch events typically include a ‘grand opening’ day with entertainment, free pizzas and visits from local dignitaries. It also runs national marketing campaigns and special offers, backed up by a marketing team to help franchisees promote their stores at a local level. Franchisees can expect to pay extra for those services. There is a 5% royalty fee on the store’s weekly net sales figures, and a 4% marketing fee is also charged on its weekly net sales.
The time commitment for new stores is considerable: franchisees can expect to work anywhere from between 11am and 11:30pm, seven days a week, without taking into account additional marketing, sales or other operational requirements.
Break-even stands at £5-5,500 net sales per week and, according to Youngman, it can take up to one year to build up to this level. However, an established store can take between £8,0000 and £12,000 net sales per week, giving it a potential annual profit after all costs have been excluded of between £62,700 and £119,200.
Source: New Business Magazine
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