Carl’s Jr. is an American-based fast-food chain with locations worldwide, including in Asia and Europe. The restaurant chain was established in 1941. After more than 80 years serving up burgers and fries, the company has expanded to more than 1,000 locations in the United States and 28 countries. Today, Carl’s Jr. is among the biggest and well-recognized fast-food restaurant chains on the planet.
How Much Does It Cost to Start a Carl’s Jr.?
Investing in a Carl’s Jr. franchise will cost anywhere from $1,375,000 to $2,003,500. Expect to pay $25,000-$35,000 for the franchise fee and a liquid capital of $160,000 to $301,500.
Is Carl’s Jr. your dream business? Here you will find some vital information on the franchise requirements, advantages, and challenges you might encounter in running your own Carl’s Jr. location. I will include all the main points you need to know before deciding whether or not this franchise is the right one for you. Now let’s dig in!
Financial Requirements and Fees
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As a starting point, let me provide some basic information about what you might need in terms of finances for you to launch your own Carl’s Jr. franchise. Here are some of the terms you will come across in this section:
- Liquid Capital – (also known as cash required) refers to the entire amount of money you have available and could access without a traditional loan.
- Net worth – refers to the value of all your non-financial and financial assets minus the value of all your outstanding liabilities.
- Total investment – is the total capital or the total money you will need to put into the franchise overtime to get it up and running.
- Franchise fee – refers to the amount you must pay to the franchisor to use its brand and resources.
|Fees or Expenses||Financial Amount|
|Liquid Capital||$160,000 to $301,500|
|Total Investment||$1,375,000 to $2,003,500|
To open your own Carl’s Jr. location, you’ll need $160,000 to $301,500 of liquid capital and a net worth of more than $1,000,000. A total investment of $1,375,000 to $2,003,500 is expected and a $25,000 to $35,000 franchising fee. Royalties are paid to the company at 4% of gross monthly receipts over the 20-year term of the agreement.
Detailed Estimates of Costs
Here is the detailed breakdown of costs associated with franchising a Carl’s Jr. location:
|Opening Training Support Team Fee||$0 to $10,000|
|Building Construction||$462,000 to $495,000|
|Site Improvements (fill and compaction, curb cuts, parking lot curbs and gutters, etc.)||$210,000 to $394,000|
|Soft Costs (permits, impact fees, taxes, bonds, licenses, and other fees)||$90,000 to $120,000|
|Equipment||$340,000 to $410,000|
|Signage||$50,000 to $110,000|
|Point of Sale System||$20,000 to $45,000|
|Initial Training (costs of transportation, lodging, and food for the owner and the employees during training)||$20,000 to $60,000|
|Pre-Opening Costs (include uniforms, office supplies, and other prepaid expenses)||$8,000 to $23,000|
|Additional Funds for 3 Months||$160,000 to $250,000|
The chart shows the Detailed Estimates of Carl’s Jr. Franchise Costs Based on Item 7 (Estimated Initial Investment) of Carl’s Jr.’s 2016 Franchise Disclosure Document (FDD).
Average Sales / Revenue Per Year
Carl’s Jr. had systemwide sales of $1.5 billion during the fiscal year of 2017. The restaurant chain had a $1.3 million average unit volume (AUV) in the same year. It’s worth noting that the profitability of a location can be influenced by many factors such as lease costs, labor costs, and demand for local products.
Franchise 500’s annual list consistently ranks Carl’s Jr. high among the leading fast-food franchises. According to the 2017 list, Carl’s Jr. ranked No. 29, up from No. 54 in 2016. Carl’s Jr. has maintained its place among the top 100 for a long time. The lowest ranking they have obtained was 88th in 2006.
Carl’s Jr. Franchise Facts
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|Incorporated Name:||Carl’s Jr. Restaurants LLC|
|Subsector:||Fast-food Industry, Burger Chain|
Carl’s Jr. was founded in 1941 by Carl Nicholas Karcher. It all began when Carl and his wife opened a hot dog cart in Los Angeles using borrowed funds from their Plymouth automobile as starting capital. After a few years, they closed all their hot dog stands and moved to Anaheim, CA. From there, they began Carl’s Drive-In Barbeque, which was a full-service restaurant that quickly became a hit.
The first Carl’s Jr. restaurants were opened in 1956 in Anaheim and Brea. They were called Carl’s Jr. since they are smaller versions of Carl’s Drive-In Barbecue. By the late 1950s, there were already four Carl’s Jr. restaurants in Orange County, California. Fast forward to today, the restaurant chain has grown to more than a thousand locations in the US and other parts of the world.
Carl’s Jr. is now a subsidiary of CKE Restaurant Holdings, Inc., which is also the parent company of Hardee’s. If you have noticed how Carl’s Jr. and Hardee’s brand logos are so similar, this is because Carl’s Jr.’s parent company acquired Hardee’s in 1997.
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Throughout its history, Carl’s Jr. has run successful advertising campaigns, including endorsements from celebrities. Most recently, model Kate Upton appeared in a TV ad as did NBA star Dennis Rodman in 2005.
How Much Profit Does A Carl’s Jr. Franchisee Make Per Year?
A QSR Magazine survey has ranked Carl’s Jr. among the fast-food chains that earn the most per restaurant. As of the year end of 2020, the burger chain ranked 31st with an average of $1.4 million per unit and a systemwide sale of $1.5 billion.
While I couldn’t find any publicly available information published about average profit after expenses, a typical burger chain will bring in 10% – 12% average profit. If this rule holds true for Carl’s Jr. (and it should) then the average annual profit per unit would be $140,000 – $160,000 per store.
There are many factors that determine how much profit a Carl’s Jr. franchise owner will generate. These factors include rent costs in your area (if your premises are leased), local product demand, labor costs, and how well you manage your business. The size of the store also matters and whether or not you include a drive-thru window.
Advantages of Franchising Carl’s Jr.
As a potential franchisee, there’s a lot to consider before moving forward with any franchise concept. Here are some of the advantages of Carl’s Jr. as I see it.
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As an essential element of its business, Carl’s Jr. ensures franchisees receive comprehensive training and support running of the burger joint. Each franchise owner has the option to be assisted by Carl’s Jr. from beginning to end of a new store process: the assistance includes site selection, restaurant design, ordering equipment, construction, and training before and after opening a location.
When considering a franchise, it is essential to learn more about the company’s financial assistance programs. Unless of course you’ve got more than $1 – $2 million of cash to invest then you can read on. Fortunately, Carl’s Jr. has relationships with third-party sources that provide financing for the following items: franchise fees, startup costs, equipment, inventory, accounts receivable, and payroll. These sorts of franchise relationship can make accessing startup funds easier.
Established Burger Brand
Carl’s Jr. has survived the test of time in the competitive quick-service restaurant market longer than many other chains as it evolved from a hotdog stand to a drive-in bbq concept in nearby Anaheim, California, and has since expanded to over 1,000 locations today.
Carl’s Jr. and Hardees have been running national advertising campaigns for decades across television, radio, direct mail, coupons, and billboards. I remember seeing Hardees ads as a kid growing up in the Midwest. It’s hard to replicate a brand that’s been around for so long and is recognized by pretty much everyone.
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As an owner of a Carl’s Jr. franchise, you’ll be able to operate in a protected territory, which usually gives you some level of exclusivity in your geographic region. Franchise agreements typically provide you with exclusive rights in a given area or prohibit other franchisors from opening another franchise nearby. As a result, you will face competition from other Carl’s Jr. franchises.
Territory rights may seem like a benefit that all fast-food franchises offer, but that isn’t the case. Notably, Subway is one concept known for allowing competing franchisee’s to open up down the street. Lack of territory right combined with the low-franchise cost has resulted in numerous Subway locations shutting down over the years. Make sure you’re protected before getting involved in any franchise opportunity.
Carl’s Jr. may also provide you with continued marketing and advertising support in your community. The marketing support provided by Carl’s Jr. includes co-op advertising, ad templates, national media, regional advertising, social media, SEO, website development, email marketing, and loyalty program/app.
Challenges of Franchising Carl’s Jr.
Carl’s Jr. franchises also come with certain disadvantages and risks that should be thoroughly considered before franchising. In this section, I discuss some of the issues you’ll encounter as a franchise owner of Carl’s Jr.
The burger industry is highly competitive—there are many other fast-food chains with burger-centric menus, such as McDonald’s, Burger King, and Five Guys. Although Carl’s Jr. has already been around for decades, when one thinks of burgers, they can get lost in the mix.
The other thing to consider is that future burger concepts continue popping up. Burgers, after all, are a profitable and easy meal to make that will always be in demand from consumers. You’ll need to rely on Carl’s Jr. corporate to continue innovating.
Many Locations Are Closing
Franchisees are suffering from mandatory higher wages in some states and cities. In addition, competition from other quick-service chains (and sit-down restaurants) is eating away at profitability. The Carl’s Jr/Hardee’s chain operates very few stores of its own, instead of franchising the Carl’s Jr/Hardee’s chain to small companies, many of whom run multiple stores in the same geographical area. In some areas like Arizona, the restaurant has struggled to gain traction.
When demand drops to the point where income cannot cover expenses (rents on the West coast have increased dramatically), shutting down operations may be the only option.
History of Problematic Ads
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Carl’s Jr. is famous for its ads depicting naked female celebrities in sexualized scenarios while eating fast food. Though the burger chain has found a way to avoid further criticism that their ads objectify women, the damage has already been done.
Franchise owners don’t have much input in the direction of the marketing campaigns. If you are not comfortable with these types of marketing campaigns, consider an alternative restaurant franchise that is more conservative in their marketing historically.
Labor shortage is the reality of the restaurant industry right now. To be clear, this is a challenge impacting all fast-food restaurants, not just Carl’s Jr.
Aside from the global pandemic, which caused many staff to not show up for work, there are all sorts of reasons for the labor shortage in the restaurant industry right now including lower wages and retirement of Baby Boomers. What makes it difficult to recruit new employees is that the restaurant industry has a poor reputation when it comes to workplace quality with long hours in hot kitchens, few benefits, and low wages.
Is the Carl’s Jr. Franchise Right For You?
To determine if Carl’s Jr. is the right franchise for you, consider the pros and cons in a logical way. Remember that the cost of investing in a franchise goes beyond the money, because it also involves your time and effort. You’re going to be tied to this company for the next decade at least. Ask yourself the following questions can be an effective way to reflect whether or not Carl’s Jr. is worth investing:
- How passionate are you about this type of business? More often, entrepreneurs are advised to follow their passions and do what they love. The idea behind this is that so long as you are doing what you are passionate about, then it will be easier for you to overcome setbacks and succeed.
- Are you willing to invest your time and money in this business? For a business to succeed, it requires a significant investment of time, energy, and money. Therefore, you must be willing to sacrifice a great deal in order for it to succeed. Do you want to be working inside a Carl’s Jr. all day? Be honest with yourself before filling out a franchise application.
Where Can You Find Existing Carl’s Jr. Franchise Opportunities for Sale?
Although a lot of sites list franchise opportunities, not every site also lists resale opportunities. Resale opportunities allow you to buy a Carl’s Jr. that’s already in business.
There are pros and cons to this approach as well. The advantage is that you’ll be able to buy a store that’s already built, passed health inspections, and has a built-in customer base. The flip side is that you might end up purchasing a failing location that’s got a bad reputation in the location community. Not easy to turn around.
If you are considering buying an existing franchise business, some of these websites may be important to consider. Alternatively, you can search specifically for “franchise resales,” which allows you to see more local results in Google.
- BizBuySell. When you select “advanced search,” you can type terms such as “resale” or “existing business” into the keyword field. State, county, city, and industry preferences can be entered to narrow your search results.
Is Carl’s Jr. a Cheap Franchise to Open?
A Carl’s Jr. franchise costs anywhere between $1,375,000 and $2,003,500, which is in line with its biggest competitor, McDonald’s. However, the franchise fee of Carl’s Jr. is cheaper than the Golden Arches’. In the table below, I compare the franchise costs of Carl’s to its three biggest competitors. Each of these fast-food concepts is worth investigating further if you want to break into this industry.
|Company Name||Franchise Fee||Total Investment|
|Carl’s Jr.||$25,000-$35,000||$1,375,000 to $2,003,500|
|McDonald’s||$45,000||$1,000,000 to $2,000,000|
|Burger King||$50,000||$316,100 to $2,660,600|
|Five Guys||$25,000||$306,200 to $641,250|