Do Pizza Franchises Make Money?
Pizza franchises have long been a staple of the quick-service restaurant industry, but how profitable are they really? With the pizza industry valued at $46 billion annually in the U.S., franchising offers an opportunity for entrepreneurs. However, profitability varies based on brand, location, and market conditions.
Let’s examine the financial performance, key drivers of profitability, and market trends that impact pizza franchise success.
Financial Performance of Pizza Franchises
Pizza franchises can yield significant revenues, with top-performing brands like Hungry Howie’s achieving an average unit volume of more than $1.2 million in 2023 for the top 25% of franchised stores.*
Despite the potential for high revenues, profit margins depend on managing costs effectively. Labor, food supplies, and utilities account for significant expenses, often eating into earnings.
Factors Influencing Profitability
- Startup and Operating Costs: Initial investment varies widely across franchises. While Hungry Howie’s startup costs are on par within the industry, the brand’s strong reputation ensures a consistent customer base. In contrast, smaller or less recognized franchises may require higher marketing efforts to attract customers.
Operating costs have also risen due to inflation and labor shortages. According to PMQPizza’s 2024 Pizza Power Report, over 84% of restaurants raised wages in 2022, and 37% began offering paid sick leave to attract and retain staff. These increases, while necessary, can tighten profit margins.
- Revenue Drivers: Profitability depends on location, customer loyalty, and leveraging technology. Many franchises have embraced digital platforms to improve customer experiences. Hungry Howie’s, for instance, benefits significantly from its robust online ordering system.
- Challenges in Operations: The industry faces labor shortages, with 73% of restaurants reporting difficulty finding staff. Additionally, inflation has driven up food and supply costs, making it essential for franchisees to maintain operational efficiency.
Pizza Franchise Trends and Market Potential
Pizza franchises are adapting to meet consumer demands and market challenges. Here are some key trends shaping the industry:
- Market Growth: The demand for pizza remains strong across all demographics, contributing to steady growth. Franchises like Hungry Howie’s capitalize on this demand through innovations such as flavored crusts and loyalty programs.
- Technology Adoption: The integration of technology, including online ordering and automation, has been a game-changer. For example, some franchises are experimenting with robotic food runners to reduce staff workload and improve customer service.
- Shifting Consumer Expectations: With rising costs, consumers expect high value for their money. Successful franchises focus on quality and consistency to justify premium pricing.
Is a Pizza Franchise a Good Investment?
Investing in a pizza franchise can be lucrative but requires thorough research and preparation. Here’s a balanced view of the pros and cons:
Pros:
- Proven Business Models: Established franchises offer structured training, support systems, and brand recognition.
- Revenue Potential: High-performing stores can generate significant annual sales, as evidenced by industry leaders.
Cons:
- High Initial Investment: Entry costs for popular franchises can be steep, and ongoing expenses like royalties and marketing fees further add to the financial burden.
- Operational Challenges: Labor shortages and inflation create operational difficulties, which can affect profitability.
Conclusion
Pizza franchises offer a promising opportunity for entrepreneurs, but success depends on several factors. Thoroughly evaluating the franchise brand, understanding the market, and efficiently managing costs are critical to profitability. For those ready to take the plunge, the pizza industry remains a resilient and rewarding sector, provided you’re prepared for the challenges ahead.
*Based on Gross Sales of the top performing 25% (or 70 units) of Hungry Howie’s Franchised Units that were open for the entire 53-week period from December 26, 2022 through December 31, 2023. Franchised Units means all Hungry Howie’s Units that were open and reported sales for the entire fiscal year, and excludes units in the State of Florida, affiliated units, units which opened or closed during the above fiscal year, units which are not obligated to and do not report sales to us, and units closed for more than ten consecutive days during the above fiscal year due to a force majeure event. The Franchised Units are in 20 states and have reasonably similar operations as those being offered for sale. Refer to Hungry Howie’s 2024 Franchise Disclosure Document for additional information.
