MOD Pizza Franchise in 2024: Costs, Fee & FDD
Considering a MOD Pizza franchise? Check out our detailed analysis covers costs, earnings, and insights into this once fast growing but now struggling brand. Learn about the latest analysis before making a franchise decision.
Table of Contents:
MOD Pizza was founded in 2008 by Scott and Ally Svenson, a dynamic couple with a vision to revolutionize the pizza industry. They aimed to create a place where high-quality, customized pizzas could be served quickly and affordably, embracing a “fast casual” concept. The brand stands out with its commitment to customer satisfaction and community involvement, transforming the pizza experience into something personal and unique. MOD’s focus on creating a welcoming environment and offering customizable options has made it a significant player in the fast-casual dining sector.
At the heart of MOD Pizza’s offerings are its artisan-style pizzas, which are made to order with a variety of fresh, high-quality toppings. The brand is known for its “create your own pizza” concept, allowing customers to build their pizzas from a wide selection of ingredients. In addition to pizzas, MOD offers salads, sides, and desserts, catering to a broad range of dietary preferences. Its core customers are typically young professionals, families, and pizza enthusiasts who appreciate both the speed of service and the flexibility to personalize their meals. MOD Pizza’s approach appeals to those who value quality, convenience, and affordability.
MOD Pizza has experienced impressive growth since its inception. As of now, the franchise operates over 600 locations across the United States and the United Kingdom. This rapid expansion reflects the brand’s success and popularity in the fast-casual dining market. With a strong daily customer base, MOD Pizza’s locations serve thousands of guests, showcasing its ability to maintain a consistent and high-quality dining experience while scaling rapidly.
MOD Pizza offers a comprehensive franchise support system designed to ensure the success of its franchisees. The company provides extensive training programs covering everything from operations to marketing strategies, ensuring that new franchisees are well-equipped to run their stores effectively. Additionally, MOD Pizza supports its franchisees with ongoing operational assistance, marketing resources, and access to a network of experienced peers. This robust support structure helps franchisees maintain the brand’s high standards and adapt to evolving market conditions, making MOD Pizza a strong contender for potential investors in the fast-casual pizza sector.
MOD Pizza Potential Bankruptcy
Recent reports indicate that MOD Pizza has faced financial challenges, raising concerns about potential bankruptcy. This situation stems from several factors, including pandemic-related disruptions, rising operational costs, and competitive pressures. As a potential franchisee, this could impact you in a few ways:
- Risk Assessment: Bankruptcy could lead to restructuring or closure of some locations, potentially affecting brand stability and consumer confidence.
- Support and Resources: Financial strain might reduce the level of support and resources available from the franchisor, such as marketing, training, and operational assistance.
- Investment Security: The uncertainty surrounding bankruptcy could make it harder to secure financing or favorable lease terms.
However, it’s also essential to consider that restructuring could lead to a leaner, more focused company better positioned for future growth. Due diligence, including reviewing financial statements and understanding the franchisor’s recovery plan, is crucial before making an investment decision.
MOD Pizza Franchise Insights
- Despite a challenging industry landscape, MOD Pizza achieved a 2% year-over-year growth rate, outpacing the broader industry which saw no growth. This suggests that MOD Pizza’s business model and customer appeal are strong, even in a stagnant market.
- With a 7% failure rate over three years, MOD Pizza demonstrates a significantly lower risk compared to the industry average of 11%. This indicates a higher level of franchisee success and satisfaction within the MOD Pizza system.
- MOD Pizza is renowned for its strong community involvement, actively supporting local charities and initiatives through its “MOD Squad” program. This community focus not only enhances the brand’s reputation but also fosters customer loyalty.
- The franchise is a pioneer in the fast-casual sector with its fast, customizable pizza ordering process, allowing customers to create their perfect pizza from a wide array of fresh toppings. This innovation has helped MOD Pizza stand out in a crowded market and attract a diverse customer base.
MOD Pizza Franchise Key indicators
Growth YOY (%)
2%
vs industry 0%
Total Investment
$1M-$1.3M
3-year Failure Rate
7%
vs industry 11%
Sales-to-Investment ratio
1:1
How much does it cost to open a MOD Pizza franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a MOD Pizza 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 MOD Pizza 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 MOD Pizza franchise below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Initial Franchise Fee | $30,000 | $30,000 |
| Leasehold Improvements | $445,640 | $613,337 |
| Training Costs | $5,000 | $18,000 |
| Furniture, Fixtures, Supplies, Décor, Equipment | $416,583 | $456,797 |
| Site Design, Architectural and Engineering Fees | $32,000 | $45,000 |
| Point-of-Sale and Computer System | $15,000 | $23,000 |
| Beer and Wine License Costs | $2,000 | $15,000 |
| Miscellaneous | $15,000 | $40,000 |
| Grand Opening Marketing | $10,000 | $10,000 |
| Additional Funds - 3 Months | $30,000 | $50,000 |
| Total | $1,001,223 | $1,301,134 |
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
To open a MOD Pizza franchise, the financial requirements include initial investment costs, liquid assets, and net worth. Here’s a breakdown of what you might need:
- Initial Investment The estimated total initial investment for a MOD Pizza franchise ranges from $1 million to $1.3 million. This amount covers the franchise fee, real estate, construction, equipment, initial inventory, and other startup costs. 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 MOD Pizza investment.
- Liquid Assets Requirement MOD Pizza typically requires franchisees to have at least $250,000 in liquid assets. This ensures that franchisees have enough readily available funds to manage initial expenses and maintain financial stability during the early stages of operation.
- Net Worth Requirement The recommended net worth for a MOD Pizza franchisee is approximately $750,000. This includes the total value of assets such as real estate, investments, and personal property, minus liabilities, ensuring that franchisees have a solid financial foundation.
How much does a MOD Pizza franchise owner make?
Calculating the salary of a MOD Pizza 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 MOD Pizza 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.
MOD Pizza Revenue & Gross Sales
MOD Pizza showed an impressive bounce-back in median gross sales that were heavily impacted by the COVID-19 lockdowns, with a notable 24% increase in median gross revenue from 2020 to 2021. From public information and our internal analysis, we estimate the MOD Pizza has a median gross revenue of $1,200,000. As MOD pizza has been dealing with bankruptcy issues as of 2024, it would appear that their locations are experiencing issues with gross sales and profitability. Additionally, the franchise has not disclosed updated earnings in its Item 19 for some time, which is typically a bad sign.
Which key factors impact the average revenue performance of MOD Pizza franchisees?
The decline in U.S. franchisee median gross sales revenue for MOD Pizza over the past few years can likely be attributed to several factors. Firstly, the COVID-19 pandemic significantly disrupted the restaurant industry, leading to reduced foot traffic and operational challenges. Additionally, increased competition in the fast-casual pizza segment may have impacted market share. Supply chain issues and rising ingredient costs could also have squeezed profit margins. Lastly, evolving consumer preferences and economic uncertainty may have influenced dining habits, leading to fewer dining out occasions. These combined factors created a challenging environment for maintaining previous revenue levels.
MOD Pizza Franchise Operational Costs
When considering opening a MOD Pizza franchise, it’s essential to be aware of the key ongoing operational costs that will impact your budget. Understanding these expenses will help you manage your finances effectively and ensure the long-term success of your franchise.
- Food and Beverage Regular expenses for purchasing fresh ingredients and beverages.
- Labor Wages for employees, including salaries, benefits, and training costs.
- Rent Monthly lease payments for the franchise location.
- Utilities Costs for electricity, water, gas, and other essential services.
- Maintenance Routine upkeep and repairs to ensure the store remains in good condition.
- Supplies Costs for paper goods, cleaning supplies, and other necessary items.
- Marketing Expenses for local advertising, promotions, and community engagement activities.
- Royalty Fees Ongoing fees paid to MOD Pizza, usually a percentage of gross sales.
- Insurance Coverage for property, liability, and worker’s compensation.
- Technology Costs for POS systems, software, and other technological needs.
By keeping these ongoing operational costs in mind, you can better plan and allocate your resources to maintain a thriving MOD Pizza franchise.
MOD Pizza Franchise Fees
When operating a MOD Pizza franchise, it’s crucial to understand the ongoing fees associated with the business. These fees ensure that you maintain compliance with the franchise agreement and contribute to the overall success of the brand. Here are some of the key ongoing fees to consider:
- Continuing Fee (Royalty Fee) 5% of weekly revenues. This fee is calculated based on total dollar sales, excluding certain taxes and one-time sales.
- Marketing Fees 2% of weekly revenues, potentially increasing to 3% with 90 days’ notice. These fees are deposited into the Marketing Fund managed by MOD Pizza.
- Audit Fees The amount incurred by MOD Pizza for auditing your business, estimated to range from $2,000 to $5,000. Due within 10 days of receiving the invoice if an audit reveals understated revenues by more than 2%.
- Transfer Fee 30% of the current initial franchise fee for a single MOD Pizza location, plus training fees for new management staff.
- Additional Fees There might be additional fees for various other services or requirements stipulated in the franchise agreement.
Understanding these ongoing fees will help you budget effectively and ensure the smooth operation of your MOD Pizza franchise.
MOD Pizza Franchise Earnings
To calculate earnings, we must consider the estimated gross sales of a MOD Pizza franchise. Our findings are that the median gross sales for a MOD Pizza franchise are roughly $1,200,000. However, MOD Pizza has not been disclosing unit level economics the past couple of years, so it is an estimate.
Based on this level of gross sales, we can estimate the earnings for owner-operators to be $144,000. This would be for EBITDA, assuming that the owner is actively involved in managing the business. We estimate that semi-absentee owners would earn less due to the need to hire a manager to operate the location day-to-day.
How to Open a MOD Pizza Franchise
Becoming a MOD Pizza franchisee involves a detailed process that ensures you are well-prepared to run your business successfully. Here’s an outline of the steps from the initial
- Initial Inquiry Submit an inquiry through the Vetted Biz website or directly contact a franchise specialist to express your interest and receive preliminary information.
- Application Submission Complete and submit a franchise application, providing details about your background, financial status, and reasons for wanting to join the MOD Pizza franchise.
- Initial Screening The MOD Pizza team reviews your application and conducts an initial screening to determine if you meet the basic requirements for becoming a franchisee.
- Discovery Day Attend a Discovery Day at the MOD Pizza headquarters to meet the executive team, learn more about the company culture, and get a deeper understanding of the business model.
- Approval and Agreement If both parties agree to move forward, you will receive approval, and the franchise agreement will be finalized and signed. This step includes paying the initial franchise fee.
- Site Selection and Lease Negotiation Work with the MOD Pizza real estate team to select a suitable location for your franchise. Negotiate and finalize the lease agreement for your chosen site.
- Training Program Participate in a comprehensive training program covering all aspects of running a MOD Pizza franchise, including operations, marketing, and management.
- Store Build-Out Oversee the construction and build-out of your store, following MOD Pizza’s design and layout specifications. This step includes purchasing equipment, furniture, and initial inventory.
- Pre-Opening Marketing Implement pre-opening marketing strategies to generate buzz and attract customers to your new location. This can include local advertising, social media campaigns, and community events.
- Grand Opening Conduct a soft opening followed by a grand opening event to officially launch your MOD Pizza franchise. This event helps establish your presence in the community and attract initial customers.
- Ongoing Support Once your franchise is operational, you will receive ongoing support from the MOD Pizza team, including regular check-ins, marketing assistance, and operational guidance to ensure continued success.
Pros & Cons
Pros
Rapid Customization Model: The ability to offer rapid, fully customizable pizzas taps into current consumer trends for personalized dining experiences, setting MOD Pizza apart from traditional pizzerias.
Innovative Tech Integration: MOD Pizza’s investment in digital ordering and delivery platforms enhances customer convenience and increases sales opportunities.
Cons
High Initial Capital Requirements: The upfront investment of $1 million to $1.3 million can be a barrier to entry for potential franchisees without substantial financial resources.
Labor-Intensive Operations: The fast-paced, customization-centric model requires a well-trained and motivated workforce, posing challenges in hiring and retention.
Fluctuating Food Costs: The reliance on fresh, high-quality ingredients can result in variable food costs, affecting profit margins during periods of price volatility.
Royalty and Marketing Fees: Ongoing fees, including a 5% royalty and up to 3% marketing fee, can eat into profit margins, necessitating careful financial management.
Local Market Dynamics: Success can be heavily influenced by local market conditions, including competition and customer preferences, which may vary significantly by region.
