5 Best Ice Cream Franchises | Cost & Payback Period Disclosed

Introduction

The dessert industry is a very popular franchise industry that many prospective franchisees will first investigate. Because they’re quite familiar with the space even from their childhood. We are talking about the ice cream franchises! There are a lot of emerging brands in this space. One of the nice things about this industry is that with the product, you can adapt very fast to changing consumer conditions. This is very different from a fitness franchise that might require a $3 million capital investment in equipment. With this type of business in the dessert industry, you can adopt the product that you’re selling pretty quickly.

In the industry, the royalties are about 5% for frozen dessert franchises including ice cream franchises, and the marketing fees are right around 2%. This is an industry average encompassing about 100 frozen dessert franchises. The ice cream and frozen dessert sector alone is very big in the United States at $6.7 billion dollars annually. It’s growing a little above 2% year-over-year.

Now that we know a bit about the ice cream industry, let’s have a look at some popular franchises in this industry:

Dairy Queen

Dairy Queen is an American quick-service restaurant that is well known for its frozen treats. Founded in 1940 in Minnesota, Dairy Queen has grown into an international brand, with over 6,800 stores around the world today. Its current CEO is Troy Bader. The company in the United States operates under America Dairy Queen (ADQ), which is a subsidiary of International Dairy Queen (IDQ). In turn, IDQ is a subsidiary of multinational conglomerate Berkshire Hathaway, famously led by Warren Buffett.

Dairy Queen franchises offers three types of franchises:

1. Dairy Queen Grill and Chill– a standard restaurant with a full menu
2. Dairy Queen Treat– generally smaller in size and offers a limited menu
3. Texas DQ Restaurant- contains a “Texas Country Food” menu

As of August 2023, there are 1,967 Grill and Chill locations, 789 Treat locations, and 585 Texas-style restaurants in the United States. Internationally, Dairy Queen has around 700 stores in Canada and over 2,000 international locations. Let’s look at the Grill and Chill Type below.

The estimated initial investment for a Dairy Queen Grill and Chill franchise is from $1,511,200 to $2,531,250. An initial, non-refundable franchise fee of $45,000 is due at the time of the signing of the Franchise Agreement. Additionally, a substantial portion of the investment cost stems from Building, Construction, and Leasehold Improvements and Equipment costs, which together are estimated to cost anywhere from $1,350,000 to $2,100,000. Together, these two costs account for over 80% of the estimated initial investment cost. The main fees associated with owning an ongoing DQ franchise are as follows:

1. A 4% licensing fee on monthly gross sales, and
2. A 5-6% sales promotion program fee on monthly gross sales.

Additional minor fees, such as a Renewal Fee, Operational Program Fee, and Additional Training fees, vary depending on location and circumstances.

Additionally, prospective franchisees must undergo a Dairy Queen training program prior to starting operations. The training program consists of 32 hours of classroom instruction and 245 hours of on-the-job training.

In the most recent year of data, 2022, the average Dairy Queen Grill & Chill under these conditions reported annual gross sales of $1,372,115. While Dairy Queen is a well-established international brand, the 9-16 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait.

Haagen-Dazs

Haagen-Dazs franchises have been available for nearly 40 years. They started franchising in 1983. Currently, there have over 300 locations. Haagen-Dazs is a dominant player in the ice cream franchise space. Again, they’ve been around for nearly 40 years. And, Haagen-Dazs is part of a larger group of Dreyer’s Grand Ice Cream, a company that’s located in Minnesota.

Haagen-Dazs, the franchisors, make nearly a million dollars on commissions from the franchisees in their system. They also require all franchisees to buy the ice cream from them. This is an important point to look out for and be okay with if you consider a Haagen-Dazs franchise for yourself. Franchise systems where you buy at a discount from the manufacturer are good but Haagen-Dazs basically sells you the ice cream at the going rate in the market.

The initial fee to open up a Haagen-Dazs franchise is $30,000. And to open one up, it’s going to cost you anywhere from $214,518, all the way up to $542,768. So that puts us at a median in the $378,643 range. And it’s not a good business if you’re investing about $380,000 to open up a Haagen-Dazs franchise. And I’ll tell you why. In 2019, median sales were $529,000. So imagine you’re making a 15% profit on that. By the time you find the location, sign the lease, build-out, break even, stabilize the business, you know, say that’s two years just to stabilize the business, it can take you another four to five years to recuperate that initial capital investment.

So, say the average Haagen-Dazs is making $80,000, $100,000 tops, it’s going to take you 5 years to recuperate your $300,000 investment or more. I didn’t want to be depressing going into the 2020 numbers. Franchisees had a drop in sales of over 40%, nearly 50% drop in sales, you heard that right for Haagen-Dazs franchisees. To say it was a bad year is an understatement. It devastated many of the Haagen-Dazs franchisees, and there were closures probably caused by the Covid-19 pandemic. However, 2021 had a positive net unit growth of 2 stores while 2022 had a negative net unit growth of 3 stores.

Baskin-Robbins

Baskin-Robbins franchise is one of the biggest ice cream shop franchises and you could very well own one. Baskin-Robbins Franchising has been offering franchises since 2006 and it is located in Canton, Massachusetts. The company is known for its “31 flavors” slogan, with the idea that a customer could have a different flavor every day of any month.

The standard initial fee to open a Baskin Robbins franchise is $25,000. This fee must be paid out of pocket, which means you cannot borrow money to pay for this fee. For every additional unit that you open you have to pay a $25,000 fee.

Baskin Robbins has a series of requirements if you want to open a franchise. These requirements include having a net worth of at least $200,000 per unit and a $100,000 liquidity and going through the application process. Foodservice or multi-management experience is also required.

The average net sales in the US are $419,003. However, sales seem to vary significantly depending on the location of the shop. This is important to note as you decide where to open your franchise. Location is one of the biggest things when opening a franchise. Based on a midpoint investment of $358,085 with estimated profits of $62,850 at a 15% profit margin, it would take about 8 years to recoup your investment.

After a few years in the business, when you go to sell your franchise based on the median multiple of .44 and net sales average from 2019-2020 of $419,003 a Baskin Robbins franchise would sell for about $184,361. This is 51% less than the midpoint initial investment of $358,085 which means you would most likely be selling at a loss.

Baskin-Robbins is a profitable business for the franchisor with income that surpasses the half-million dollars in every fiscal year. On top of that, Baskin-Robbins is seeing stable growth. Its revenue increased 5% from 2018 to 2019, and despite the pandemic which had a huge impact on competitors like Haagen-Dazs, Baskin-Robbins only saw a decline in revenue of 4% probably thanks to their delivery and take-out options.

The number of franchises has been in decay over the last three years, shrinking at a rate of over 50 outlets a year. This could be an indicator that the franchises are not performing well and that maybe they are not seeing a significant profit.

Baskin-Robbins is one of the most popular ice cream franchises in America. Ice cream is also the most popular frozen dairy product in the US, and no matter what, people will always consume it. It is also an industry that lets you adapt to new trends without a significant investment.

If you open a Baskin-Robbins franchise you can recoup your investment in 4 to 8 years depending on your profits, which is still faster than other franchises in the ice cream industry. When you go and sell your franchise, it will be at a loss.

A positive aspect of Baskin-Robbins is its robust delivery and take-out system which they continue to advertise which helped franchisees during the Covid-19 pandemic and it can also counter the location effect which makes Baskin-Robbins more accessible to people who do not understand a lot about real estate than other franchises in the ice cream industry.

It is important to note that the number of outlets has been in decline for the last three years. Which could be an indicator that franchise owners might be doing so well.

Our suggestion is to speak to at least one franchise owner before opening a franchise yourself. And to research which would be the best location for your franchise since the location has a large impact on net sales.

Chill-N

Chill-N opened its first corporate store in Miami in 2012, becoming one of the first liquid nitrogen ice cream shops in the country. The decision to make their ice cream with liquid nitrogen originated from the fact that made to order ice-cream is the highest quality you can achieve.

Chill-N’s servings are of 6 to 8 ounces and each batch is flash frozen and flavored in front of the client according to their choice of flavor and toppings. Additionally, the majority of ingredients used are fresh, generating a result that leaves clients never wanting traditional ice cream again.

Chill-N Nitrogen Ice Cream was created by Danny Golik – an ice cream lover who after 6 months of perfecting the ideal nitrogen ice cream equation in the garage of his parents’ home, created and opened his first Chill-N location in Pinecrest, FL.

In addition to Danny and Donna as founders, they brought onboard David Leonardo who has extensive experience in Franchising. The family will continue to operate 5 corporate and 2 licensed stores while growing the Franchise Division. Additionally, a sixth Corporate store is scheduled to open in August 2020 in Coconut Grove, FL.

Chill-N Franchise cost ranges from $335,578 to $474,164 according to the 2020 FDD.

Crumbl Cookies

Lastly, we’re going to discuss a Cookie Franchise that also serves ice cream. While Crumbl Cookies mainly focuses on cookies, this is another amazing opportunity in the desserts industry.

Crumbl franchise is a cookie baking and delivery business with franchised locations across the United States as well as an online store. Crumbl sells gourmet cookies with unique flavors as well as complementary ice cream and other related products. The Crumbl Cookies Franchise is a Utah-based limited liability company and was formed on February 9th, 2018. A parent company was later formed on May 29, 2019, named Crumbl Enterprises. Affiliate companies include Crumbl LLC, another Utah limited liability company organized on August 14, 2017, and Crumbl IP, LLC, which was organized two years later on November 21, 2019. As of the end of 2019, there were 55 total outlets, with 54 units franchise owned and only one unit company-owned.

Crumbl charges $25,000 for the regular initial fee, but for territory reservation agreements, which allow for franchisees to open multiple Crumbl units, the initial fee is $5,000 plus $20,000 for each additional franchise unit that is developed. The total investment necessary to begin the operation of a standard Crumbl Cookies franchise is from $227,666 to $567,833.

The financial representations in Crumbl’s FDD took a subset of continuously operating franchises throughout the year 2021. According to their FDD, the total number of franchises that existed at the beginning of 2021 and continued to operate even at the end of the year is 140, which is about 43.11% of total franchised outlets operating at the end of 2021.

A median net profit of $279,212 means that most Crumbl Cookies Franchise owners can expect to earn a profit in only a few short years. With a franchise costing between $227,666 to $567,833 and it taking about 2 years on average to open a food and beverage franchise there are calculated return on investment findings below.

The median Crumbl Cookies Franchise operator can expect to recoup their investment in as little as 2.5 years! This is from the time they begin the franchising process. From the minute their location has the grand opening it takes about 1.5 years to recoup the initial investment. Crumbl Cookies are not only a popular dessert destination, they are also highly profitable!

In 2020 Crumbl Cookies had a net income of $2,564,488, and in 2021 it grew nearly ten times as much to $22,424,381. Crumbl Cookies is seeing dramatic growth in a very short time period, which allows it to continue to open new franchises and begin seeking alternative revenue streams.

Crumbl Cookie Franchises had a staggering 2021, by more than doubling total locations across the U.S. They have greatly benefited from the shift toward delivery and takeout since the start of the Covid-19 pandemic. Crumbl Cookie Franchises tapped into social media outlets to gain a large audience. As a result, people began going out of their way to find a Crumbl Cookies Franchise near them. This leads to significant word of mouth and as a result, the Crumbl Cookie Franchise became a phenomenon overnight. In 2021 Crumbl added an additional 185 franchised locations! There are now a total of 326 total Crumbl franchises plus the single company owned and operated in Utah.

The Crumbl Cookies Franchise menu includes a wide variety of cookies and ice cream. The cookies change on a weekly basis and examples include the Classic Krispy Bar, Caramel Shortbread which includes Twix, Peach Sugar, Peanut Butter Cup with Reese’s, and Original featuring M&Ms.

Crumbl Cookie Franchise is a fairly new and unique franchise concept that has shown relatively high profitability in recent years. With signature cookie flavors that are either served warm or chilled, Crumbl takes the art of cookie baking to the next level. Furthermore, Crumbl is starting to make a name for itself in the Food and Beverage industry, as it now has over 300 locations across the U.S. The app makes it easy for customers to either pick up their cookies or have them delivered.

Conclusion

The desserts and frozen desserts industry is definitely a big segment of the Food and Beverage industry and is a favorite among new franchisees. It takes around 1 – 3 years to reach the stabilization point in this industry where you can take profits home.

There are some nice opportunities in the frozen dessert and dessert, as a whole industry. But you should do your due diligence, and, talk to some franchisees before making a decision. Look at the major trends like healthier and less-sugar foods in the industry and factor them in when making a decision.