Dave’s Hot Chicken Franchise in 2024: Costs, Fee & FDD
Discover why Dave’s Hot Chicken is one of the fastest-growing franchises in the fast-casual market. Learn about its rapid expansion and strong brand appeal—key insights for prospective franchisees. Read more!
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Dave’s Hot Chicken is a fast-casual sensation that started as a simple idea among four friends in Los Angeles in 2018. Founded by Arman Oganesyan, Tommy Rubenstein, Gary Rubenstein, and Chef Dave Kopushyan, the concept was born from their love of spicy chicken and a desire to bring a fresh twist to a classic dish. What started as a small pop-up in a parking lot quickly gained a cult following, thanks to its flavorful hot chicken and the authenticity behind its humble beginnings. Today, Dave’s Hot Chicken is recognized as one of the fastest-growing franchises in the industry, making a significant mark in the competitive fast-casual space.
The heart of Dave’s Hot Chicken is its Nashville-style hot chicken, which comes in various spice levels to suit all palates. From mild to “Reaper,” there’s a heat level for everyone. The menu is straightforward yet powerful, focusing on chicken tenders and sliders, served with sides like fries, kale slaw, and pickles. The simplicity of the menu is part of its charm, attracting a diverse customer base that ranges from spicy food enthusiasts to families looking for a satisfying meal. The brand appeals mainly to millennials and Gen Z customers, who appreciate both the bold flavors and the brand’s vibrant, no-nonsense approach.
Dave’s Hot Chicken has experienced rapid expansion, with over 100 locations now open across the United States and Canada, and plans for continued growth both domestically and internationally. The brand has become a go-to spot for chicken lovers, serving thousands of customers daily with its crave-worthy offerings. The franchise’s success is bolstered by its strong brand identity, social media presence, and word-of-mouth marketing, which have all played a key role in its impressive growth trajectory.
As a franchisee, you’ll benefit from a robust support system. Dave’s Hot Chicken offers comprehensive training programs that cover everything from operations to marketing. Franchisees receive hands-on support, including help with site selection, build-out, and ongoing operations. The brand’s commitment to quality and consistency ensures that every location delivers the same high standards, which is crucial in maintaining customer loyalty. Additionally, the franchise provides marketing and branding support, leveraging its strong social media presence to drive traffic and build community engagement around each new location.
Dave’s Hot Chicken Franchise Insights
- Dave’s Hot Chicken experienced an impressive 88% unit growth rate year-over-year, far outpacing the industry average of just 1%, showcasing its tremendous appeal and market demand.
- The franchise has attracted high-profile investors, including Drake and Samuel L. Jackson, which has boosted its visibility and contributed to its rapid brand recognition across North America.
- With a focused menu offering, Dave’s Hot Chicken maintains operational simplicity while maximizing profitability, allowing franchisees to efficiently manage inventory and reduce waste.
- The franchise model is designed for scalability, with locations ranging from small footprint urban spots to larger suburban spaces, giving franchisees flexibility in choosing the right market for their investment.
Dave’s Hot Chicken Franchise Key indicators
Growth YOY (%)
88%
vs industry 1%
Total U.S. Franchised Units
146
3-Year Failure Rate
1%
vs industry 11%
Total investment
$620K-$1.96M
How much does it cost to open a Dave’s Hot Chicken franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Dave’s Hot Chicken franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Dave’s Hot Chicken franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). You can see a breakdown of the costs to open a Dave’s Hot Chicken below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Initial Franchise Fee | $40,000 | $40,000 |
| Architect / Engineer | $14,000 | $50,000 |
| Business Licenses and Permits | $1,000 | $30,000 |
| Construction, Remodeling, and Leasehold Improvements | $275,000 | $875,000 |
| Equipment | $110,000 | $315,000 |
| Furniture, Fixtures, and Decorations | $11,500 | $100,000 |
| Smallwares | $11,000 | $18,000 |
| Signage | $17,000 | $110,000 |
| Graffiti and Artwork | $30,000 | $70,000 |
| Grand Opening Kit, Menu Boards | $12,500 | $15,000 |
| Drive-Thru, Loop Timers, and Signage | $0 | $35,000 |
| Computer Equipment and Information/POS Systems | $13,500 | $40,000 |
| Office Supplies | $1,000 | $3,000 |
| Uniforms | $1,500 | $5,000 |
| Initial Inventory and Supplies | $20,000 | $50,000 |
| Insurance Deposits | $1,500 | $4,000 |
| Liquor Licensing | $0 | $10,000 |
| Pre-Opening Rent | $5,000 | $20,000 |
| Initial Training | $12,000 | $23,000 |
| New Restaurant Opening Fee | $0 | $15,000 |
| Pre-Opening Labor Expense | $15,000 | $40,000 |
| Pre-Opening/Grand Opening Advertising | $10,000 | $12,000 |
| Miscellaneous Opening Costs | $1,000 | $20,000 |
| Professional Fees | $1,000 | $15,000 |
| Additional Funds (3 Months) | $16,300 | $48,000 |
| Total Estimated Initial Investment | $619,800 | $1,963,000 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
For Dave’s Hot Chicken specifically, the required capital, liquid assets, and net worth to open a franchise are not publicly disclosed in detail. However, based on similar franchises in the fast-casual and restaurant industry, I can provide you with some estimates to give you a general idea.
- Initial Investment Opening a franchise in this category typically requires an initial investment ranging from $620,000 to $1.96 million. This covers everything from the franchise fee, construction, equipment, and initial inventory to opening expenses. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Liquid Assets For a franchise like Dave’s Hot Chicken, it’s common for franchisors to require potential franchisees to have liquid assets of at least $200,000 to $500,000. This ensures you have the necessary capital to cover operational costs before the business becomes profitable.
- Net Worth A minimum net worth requirement of $1 million is typical for franchises in this industry, ensuring that franchisees have the financial stability to support their investment and any unforeseen expenses.
These are estimates based on industry standards, and the actual requirements for Dave’s Hot Chicken may vary. It would be best to reach out to the franchise directly for the most accurate and up-to-date information.
How much does a Dave’s Hot Chicken franchise owner make?
Calculating the salary of a Dave’s Hot Chicken franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Dave’s Hot Chicken franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Dave’s Hot Chicken Revenue & Gross Sales
Dave’s Hot Chicken has experienced significant revenue growth in recent years, driven by its rapid expansion and strong customer demand. Although specific sales data isn’t publicly available, the franchise’s consistent success across its locations highlights its solid financial performance. This upward trajectory is a testament to the brand’s market appeal and the potential profitability for franchisees, making it an attractive investment opportunity.
Which key factors impact the average revenue performance of Dave’s Hot Chicken franchisees?
The impressive performance of Dave’s Hot Chicken franchisee median gross sales in the U.S. can likely be attributed to several key factors. First, the brand’s growing popularity, fueled by its unique take on Nashville-style hot chicken and a strong social media presence, has attracted a loyal customer base. Second, the simplicity of its menu allows for operational efficiency, reducing costs and maximizing profitability. Additionally, the strategic expansion into new markets has broadened its customer reach, while its consistent focus on quality and customer experience has likely driven repeat business. These elements, combined with the overall rise in demand for fast-casual dining options, have likely contributed to the strong financial performance seen this past year.
Dave’s Hot Chicken Franchise Operational Costs
When opening a Dave’s Hot Chicken franchise, you’ll need to consider several key primary ongoing operational costs specific to running the business. These include:
- Staffing and Labor Costs Salaries, wages, benefits, and training expenses for your employees will be one of the most significant ongoing costs. This includes front-of-house staff, kitchen staff, and management.
- Food and Supply Costs The cost of purchasing fresh ingredients, packaging, and other necessary supplies will be a constant operational expense. Managing food costs effectively is crucial to maintaining profitability.
- Utilities and Rent Operating a fast-casual restaurant comes with ongoing expenses for utilities like electricity, water, gas, and internet. Rent or mortgage payments for your location will also be a significant monthly expense.
- Maintenance and Repairs Regular maintenance of kitchen equipment, dining areas, and overall facility upkeep is essential to ensure smooth operations and compliance with health and safety standards.
- Marketing and Local Advertising While the franchise may offer national marketing support, local advertising, promotions, and community engagement efforts will be important to drive traffic to your specific location.
These operational costs are critical to consider as they directly impact the day-to-day functioning and profitability of your franchise.
Dave’s Hot Chicken Franchise Fees
When opening a Dave’s Hot Chicken franchise, it’s essential to be aware of the ongoing fees that will be part of your operational costs. These fees ensure that you benefit from the brand’s ongoing support, marketing, and brand development. Here’s a breakdown of some of the key fees you should expect:
- Continuing Royalty 6% of Gross Sales, due on Wednesday of each week. This fee is based on your previous week’s Gross Sales and is paid via electronic funds transfer (EFT). It covers your ongoing right to use the Dave’s Hot Chicken brand and system.
- Creative Fund Contribution Currently 4% of weekly Gross Sales, with the potential to increase to 5% following approval by a majority of franchisees. This fee is due at the same time as the Continuing Royalty and is used for system-wide brand development and marketing efforts.
- Additional Fees There may be other fees associated with your franchise, such as local marketing contributions, technology fees, or other charges that support your business operations and the overall brand.
Understanding these fees is crucial as they are a significant part of your financial planning and ongoing costs. They ensure that your franchise remains competitive, well-supported, and aligned with the overall brand strategy.
Dave’s Hot Chicken Franchise Earnings
As a Dave’s Hot Chicken franchisee, your earnings potential will largely depend on factors such as location, operational efficiency, and customer demand. While specific median gross sales data isn’t available, franchises in the fast-casual sector typically see strong performance when well-managed, particularly in high-traffic areas. As an owner-operator, you have the advantage of being directly involved in the day-to-day operations, which can positively impact profitability through hands-on management and attention to detail.
Owner-operators often benefit from a deeper understanding of their business, allowing for better cost control, improved customer service, and more effective marketing efforts. While actual earnings will vary, the combination of a strong brand, a popular product offering, and active involvement in the business positions you for potentially solid returns on your investment. Ultimately, your success will depend on how well you leverage these factors to maximize the profitability of your franchise.
How to Open a Dave’s Hot Chicken Franchise
Becoming a Dave’s Hot Chicken franchisee involves several key steps, from your initial inquiry to the start of operations. Here’s an overview of the process:
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Discovery Day If both parties are interested in moving forward, you’ll be invited to a Discovery Day. This is an opportunity to visit the corporate headquarters, meet the leadership team, and learn more about the day-to-day operations of a Dave’s Hot Chicken franchise.
- Franchise Agreement After Discovery Day, if you decide to proceed, you’ll sign the Franchise Agreement. This legally binding document outlines the terms of your franchise relationship, including your obligations and the support you’ll receive from the franchisor.
- Securing Financing and Location Once the agreement is signed, you’ll need to secure financing if necessary and begin the process of finding a suitable location for your restaurant. The franchise team will assist with site selection and lease negotiations.
- Training Program Before opening your franchise, you’ll participate in a comprehensive training program provided by Dave’s Hot Chicken. This training will cover all aspects of running the business, including operations, marketing, customer service, and management.
- Build-Out and Pre-Opening After training, you’ll oversee the build-out of your restaurant, working with the franchise team to ensure it meets brand standards. You’ll also start pre-opening marketing efforts to build anticipation in your community.
- Grand Opening Once everything is in place, you’ll open your Dave’s Hot Chicken franchise to the public. The corporate team will provide support during the launch to ensure a smooth start.
Pros & Cons
Pros
Rapid Growth and Strong Brand Recognition: Dave’s Hot Chicken is one of the fastest-growing franchises in the fast-casual sector, benefiting from strong brand recognition and a loyal customer base.
High Customer Demand: The unique offering of Nashville-style hot chicken appeals to a broad demographic, particularly millennials and Gen Z, driving consistent customer traffic.
Simple Menu, Efficient Operations: With a focused menu, the franchise offers operational simplicity, which can reduce costs and improve profitability.
Scalability: The franchise model is designed to be scalable, allowing for flexibility in location size and market adaptation, which can be advantageous as you expand your portfolio.
Cons
Initial Investment and Ongoing Costs: The initial investment, including build-out and operational costs, can be substantial. Additionally, ongoing fees like royalties and marketing contributions are significant and can impact profitability.
Competitive Market: The fast-casual chicken segment is highly competitive, with several established brands vying for market share. This could make it challenging to stand out, especially in saturated markets.
Dependence on Location: Success is heavily dependent on choosing the right location. High-traffic areas are crucial, but they often come with higher real estate costs, adding to the financial burden.
Brand Control: As with most franchises, you will have to adhere to the franchisor’s rules and guidelines, limiting your ability to make independent business decisions.
