Franchise Deep Dive: Culver’s Franchise Costs, Fees, Profit and Data

The QSR chain that started in the Midwest offers attractive franchise opportunities, with many owners bringing in above-average sales and reaping in profits.

By 1851 Staff1851 Staff Contributions

Updated 3:15PM • 01/17/23

LAST UPDATED: December 21, 2022

FRANCHISE WEBSITE: https://www.culvers.com/franchise

NUMBER OF LOCATIONS: 900+

REPORTED COST TO GET IN: $2,349,000 – $5,356,000

REPORTED ROI (Item 19): $328,233 (estimated average annual earnings by DrFranchises)

Culver’s is an American-style fast food chain that is one of the largest QSR drive-thru brands in the nation. This casual family-friendly eatery is a popular option for a quick and filling meal in many parts of the country, and locations see high profits from their popular menu items like butterburgers, cheese curds and custard shakes. In the franchise space, Culver’s competes with other brands like Shake Shack, Five Guys, and Wendy’s.

How Many Culver’s Locations Are There?

As of mid-December 2022, there are 913 Culver’s locations in the United States, in 26 states and 688 cities. The brand only has a handful of locations that are corporate-owned, with a large majority of units run by franchisees.

Wisconsin, the company’s home state, has the most locations with 146, which is one for approximately every 39,000 people. Illinois is a close second, with 131 Culver’s units, followed by 95 in Michigan. The brand has a heavy presence in the Midwest but has branched out significantly in recent years.

The brand was founded in 1984 by an entrepreneurial family who owned A&W and McDonald’s franchises prior. Culver’s began franchising in 1988, offering terms with no fees or royalties, but the agreement went sour after the owner abandoned the deal. In 1991, the company tried franchising again and soon had five locations open.

For the last few years, the franchise has seen enormous growth and not much loss. Since 2016, the franchise has only closed one unit but has opened 237 locations. The average unit growth rate over the years is nearly 7%.

Culver’s is a private company owned by Roark Capital Group, so it is not publicly traded on the stock market. However, in comparison to similar concepts, Wealthy Diligence estimates that if it were, its IPO opening price would be about $20 – $40, and a single share of stock could grow to be worth up to $250 when analyzing the previous 52-week highs of companies operating in the same sector.

What is the Culver’s Business Model?

Culver’s restaurants have an American fast food menu with burgers, sandwiches, salads, dinners, frozen custard desserts and beverages. Each location offers customers numerous options for ordering and therefore multiple revenue streams: drive-thru, carryout and on-site dining. The brand requires individual franchisees to be full-time on-site owner-operators and be hands-on in the management process of their unit unless given specific permission otherwise.

The franchise offers initial agreements that have a term length of 15 years. Well-performing franchise owners in the system are allowed the option to renew their agreement for an additional 10-year period.

How Much Can Culver’s Franchise Owners Make?

The financial performance representations in the brand’s 2020 Franchise Disclosure Document (FDD) show the gross sales data for 677 franchise units that operated during the 2019 calendar year.

Highest Sales: $5,411,462
Lowest Sales: $929,930
Average Sales: $2,519,529

Nearly half (47%) of franchise owners met or exceeded the average sales point. The state with the highest average unit sales in 2019 was Indiana.

With DrFranchises estimating that franchisees see an EBITDA margin of 13%, that leads to about $328,233 in income each year.

How Much Does it Cost to Open a Culver’s?

The funds required to open a Culver’s restaurant are on the higher end, with a few million dollars needed to get a location up and running. To become a Culver’s franchisee, the investment range is $2,349,000 – $5,356,000. This range includes the franchise fee. VettedBiz estimates that with the midpoint investment being $3,852,500, it typically takes owners between 10 to 17 years for them to recoup the money they put down.

Franchise Direct breaks down what some of the initial costs go towards:

Land: $185,000 – $2,000,000
Site Work: $316,000 – $917,000
Building: $1,115,000 – $1,774,000
Travel: $20,000 – $80,000
Initial Inventory: $45,000 – $50,000
Furniture, Fixtures, Equipment and Supplies: $387,000 – $492,000
Sign Package: $106,000 – $220,000
POS System: $37,000 – $50,000
Miscellaneous Expenses: $20,000 – $40,000
Additional Funds: $50,000 – $100,000

Ongoing Costs and Fees include:

Service Fee: 4% of gross sales
Advertising Fee: 2.5% of gross sales
Cooperative Advertising: Up to 4% of the gross sales
Additional Training: $1,000 per person
E-Learning Program: $740 annually
Additional Assistance: $500 per week
Insurance, Management Fee, Attorney’s Fees: Varies
Technology Fee: ~ $300 per month

What is the Franchise Fee for Culver’s?

The franchise fee to open a Culver’s restaurant ranges between $30,000 and $50,000, depending on circumstances and deal type. This fee and the agreement must be signed within 18 months of approval, the 2020 FDD states.

Multi-unit development agreements have development fees of $10,000 per restaurant. The brand also offers current franchisees the right to reserve a territory up to two years in advance for a fee of $20,000.

Culver’s “Mentorship Program” allows existing franchisees to purchase another location that one of their general managers will operate for a reduced franchise fee of $30,000. The franchise also offers a “Veterans’ Discount” that takes $10,000 off the initial fee.

Who is the Leadership of Culver’s?

What Helpful Articles Can I Read to Learn More About Culver’s?

Franchise Deep Dive: Culver’s Franchise Costs, Fees, Profit and Data

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