Five Below Franchise in 2025: Costs, Fee & FDD
Discover the potential of Five Below, a dynamic retail brand with over 1,700 stores and plans to expand. Explore its impressive growth, profitability, and why it sets the gold standard in retail.
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Five Below is a vibrant and dynamic retail concept that has taken the value retail sector by storm since its inception. Founded in 2002 by Tom Vellios and David Schlessinger, the company has carved a niche for itself by offering an exciting shopping experience at unbeatable prices. Headquartered in Philadelphia, Pennsylvania, Five Below has become a beacon for tweens, teens, and bargain enthusiasts looking for trendy products without breaking the bank. The founders’ vision was to create a fun, engaging, and affordable shopping environment, and they’ve succeeded in making Five Below a household name in the U.S. retail landscape.
The core offerings of Five Below store include a wide range of products priced at $5 and below, encompassing categories like toys, games, fashion accessories, beauty products, tech gadgets, and home décor. The brand also features ancillary products like candy, sports gear, and seasonal items, ensuring there’s something for everyone. Five Below’s primary market is the younger demographic, particularly tweens and teens, but its appeal extends to families and individuals seeking value and variety. The store’s vibrant atmosphere and ever-changing inventory make it a go-to destination for those looking to shop and have fun simultaneously.
Currently, Five Below operates over 1,700 stores across 44 states in the United States, with ambitious plans to expand further. The company has made strategic moves into states like Illinois, Michigan, Georgia, Texas, and California, aiming to grow its presence to 2,500 locations. While Five Below doesn’t franchise its stores, it maintains a robust corporate structure that allows for consistent brand experience and operational efficiency. The company attracts millions of customers annually, drawn by its unique blend of affordability and excitement.
In addition to its impressive retail footprint, Five Below has garnered attention for its strong financial performance and commitment to social responsibility. With recent sales reaching $3.56 billion and a five-year compound annual growth rate of 18%, the company is a formidable player in the retail industry. Five Below has also contributed over $19 million to children’s charities, underscoring its dedication to giving back to the community. As the company continues to innovate and expand, it remains a beloved brand that delivers exceptional value and a unique shopping experience to its customers. Notably, the average cash payback period for a new stores is just seven months, highlighting the efficiency and profitability of their business model.
Five Below Franchise Insights
- With over 1,700 stores across 44 states, Five Below plans to expand to 2,500 locations, focusing on states like Illinois, Michigan, Georgia, Texas, and California.
- The company does not franchise its stores, instead maintaining direct control to ensure brand consistency and operational efficiency.
- Five Below has a strong financial performance, with recent sales reaching $3.56 billion and a five-year CAGR of 18%, making it an attractive investment opportunity.
- The store model is designed for fun and efficiency, featuring bright lighting and easy navigation, supported by a distribution center that minimizes shipping costs.
- Five Below has contributed over $19 million to children’s charities, highlighting its commitment to social responsibility and community engagement.
- The Motley Fool Stock Advisor has identified Five Below as a top stock for investors, with a forward price-to-earnings ratio of 45 times, signaling its growth potential.
How much does it cost to open a Five Below franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Five Below franchise. While it is not currently possible to become a franchisee of Five Below, you can still see the costs to open up a new Five Below a location. These financial commitments, including 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 Five Below location involves several key costs. As Five Below does not produce an up to date Franchise Disclosure Document (FDD), we can estimate the costs for a Five Below based on public filings and analysis. The costs to open up a new Five Below location are estimated to be between $345,000 and $1,040,000. The lower costs are expected for smaller location conversions and the higher costs are expected for new and larger locations.
Below are the estimated investment cost range to open a new Five Below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Franchise fee (estimate) | $50,000 | $100,000 |
| Real Estate/Leasehold Improvements | $150,000 | $500,000 |
| Equipment and Fixtures | $50,000 | $150,000 |
| Initial Inventory | $30,000 | $100,000 |
| Signage | $10,000 | $30,000 |
| Grand Opening Marketing | $5,000 | $20,000 |
| Insurance | $5,000 | $15,000 |
| Working Capital | $20,000 | $50,000 |
| Additional Funds (3 months) | $25,000 | $75,000 |
| Total Estimated Investment | $345,000 | $1,040,000 |
Required Capital
Opening a Five Below location or a similar-sized investment concept requires careful financial planning and capital allocation. Here are the estimated financial requirements for such an endeavor:
- Initial Capital Requirement Estimated to be between $345,000 and $1,040,000, depending on the size and location of the store. This includes costs for real estate improvements, equipment, and initial inventory. 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 It is advisable to have at least $150,000 to $300,000 in liquid assets to cover initial setup costs and unforeseen expenses during the first few months of operation. This ensures smooth cash flow and operational stability.
- Net Worth Prospective investors should have a net worth of $500,000 to $1,000,000. This demonstrates financial capability and provides a safety net for potential business challenges.
How much does a Five Below franchise owner make?
While Five Below is not currently franchising in the U.S., it helps to know how much a potential Five Below franchise owner would make for if and when they decide to franchise. Calculating the salary of a hypothetical Five Below 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 potential Five Below 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.
Five Below Revenue & Gross Sales
Five Below’s recent revenue performance has been impressive, with the company achieving significant growth. The brand has witnessed a robust increase in sales, reaching $3.56 billion, supported by a five-year compound annual growth rate of 18%. This growth reflects Five Below’s successful expansion strategy and its ability to attract a diverse customer base. The company’s focus on providing affordable and trendy products has contributed to its strong financial standing and continued popularity among shoppers across the United States.
Which key factors impact the average revenue performance of Five Below franchisees?
Several key factors contribute to the impressive performance of Five Below’s U.S. locations in terms of average gross sales revenue. The brand’s strategic focus on offering trendy and affordable products attracts a wide range of customers, particularly tweens, teens, and families. Its vibrant store atmosphere and ever-changing inventory keep shoppers engaged and returning for more. Additionally, Five Below’s strategic expansion into high-demand states ensures a strong market presence and accessibility. The company’s effective marketing strategies, including TV ads and community events, further boost brand visibility and customer loyalty. Lastly, a robust distribution center network supports efficient inventory management, minimizing costs and maximizing sales potential across all locations.
Five Below Franchise Operational Costs
Opening a retail concept akin to Five Below involves navigating a landscape of continuous operational expenses that ensure smooth business functioning and customer satisfaction. Understanding these costs is crucial for effective financial planning and maintaining profitability.
Here are the primary ongoing operational costs to consider:
- Staff Salaries and Wages Regular payments for staff, including cashiers, stock clerks, and management, are essential to keep the store running efficiently.
- Inventory Restocking Constant replenishment of stock to meet customer demand and maintain a diverse product range is a significant ongoing expense.
- Utilities Costs for electricity, water, heating, and cooling are necessary to keep the store environment comfortable and operational.
- Lease or Rent Payments Monthly payments for the retail space are a major fixed cost, often influenced by location and store size.
- Insurance Regular premiums for property, liability, and employee insurance protect the business from unforeseen events.
- Maintenance and Repairs Routine upkeep of store fixtures, equipment, and facilities ensures a safe and pleasant shopping environment.
- Technology and POS Systems Regular updates and maintenance of point-of-sale systems and other technology are vital for efficient operations.
- Security Expenses related to security systems and personnel to safeguard the store and its inventory.
By carefully managing these ongoing operational costs, you can ensure the long-term success and profitability of your retail venture, similar to the thriving model of Five Below.
Five Below Franchise Fees
Since Five Below is not a franchise, it does not have any franchise fees. Five Below operates as a wholly corporate-owned chain rather than a franchise. This means that all Five Below locations are owned and managed by the corporate entity rather than by individual franchisees. By maintaining direct control over all its stores, Five Below ensures consistency in quality, service, and operational standards across all its locations. This corporate structure allows Five Below to implement its business strategies uniformly and maintain a strong brand identity without relying on external franchise operators.
Five Below Franchise Earnings
While specific earnings data for Five Below franchises is not available, we can provide an informed overview based on industry standards and franchise characteristics. Typically, the potential earnings of a retail franchise are influenced by various factors such as location, store size, and market demand. A well-situated store in a high-traffic area can attract more customers, leading to higher sales volumes. Additionally, the brand’s reputation and marketing strategies play a crucial role in drawing in shoppers, which can significantly impact revenue. Five Below’s focus on offering trendy and affordable products aligns with consumer demand, potentially boosting sales and profitability for each location.
How to Open a Five Below Franchise
Five Below operates as a wholly corporate-owned chain, which means it does not offer franchise opportunities. All Five Below locations are owned and managed by the corporate entity, ensuring consistency in quality, service, and operational standards across all its stores.
While Five Below does not offer franchises, individuals interested in leading one of its locations can aim to become a general manager. Here are the steps to achieve this role:
- Gain Retail Experience Accumulate experience in retail management, preferably in similar value-driven or high-volume retail environments.
- Develop Leadership Skills Focus on building strong leadership and team management skills, which are crucial for overseeing store operations and staff.
- Understand Company Culture Familiarize yourself with Five Below’s brand values and operational standards to align with the company’s expectations.
- Apply for Internal Promotions If already employed at Five Below, express interest in advancement opportunities and demonstrate your capabilities to move up the ranks.
- Network with Current Managers Engage with current general managers to learn about their experiences and gain insights into the role.
- Pursue Relevant Education Consider obtaining a degree in business management or a related field to enhance your credentials.
- Apply for Open Positions Monitor Five Below’s career page for general manager openings and apply with a tailored resume and cover letter highlighting your relevant experience and skills.
By following these steps, aspiring individuals can position themselves to become a general manager at a Five Below location, contributing to the company’s success and growth.
Pros & Cons to Opening a New Five Below Location
Pros
Strong Brand Recognition: Five Below is a well-established brand with a loyal customer base, particularly among tweens, teens, and families, which can drive significant foot traffic to new locations.
Affordability and Variety: The store’s unique value proposition of offering trendy and affordable products ensures a broad appeal, attracting a diverse range of customers seeking cost-effective shopping solutions.
Strategic Expansion: Five Below’s expansion into high-demand states like Illinois, Michigan, Georgia, Texas, and California ensures access to vibrant markets with growth potential.
Community Engagement: The company’s commitment to social responsibility and community involvement enhances its reputation and customer loyalty, benefiting new locations.
Cons
Market Competition: The retail sector is highly competitive, with numerous players vying for customer attention, which can impact sales and profitability.
Operational Challenges: Managing a new location involves navigating operational complexities, including staffing, inventory management, and maintaining consistent service standards.
Economic Uncertainty: Economic fluctuations and changes in consumer spending habits can affect sales performance and profitability.
