Mellow Mushroom
Mellow Mushroom offers pizza and other food items in a casual dining setting, known for its unique atmosphere and craft beverages. Part of the quick-service restaurant industry, it provides franchises with comprehensive support to open their own locations.
About Mellow Mushroom
Mellow Mushroom Pizza Bakers is an American pizza restaurant chain established in 1974 in Atlanta, Georgia as a single pizzeria. It operates as a franchise under the banner of Home Grown Industries, Inc. of Georgia, with 170 locations throughout the United States. Its headquarters are in Atlanta.
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Mellow Mushroom franchise FAQ
How much does it cost to open one — the total initial investment?
The total initial investment necessary to begin operation of a Mellow Mushroom® restaurant franchise ranges from $1,688,000 to $4,856,500 depending on whether you lease or buy the premises and other factors. This includes between $82,000 and $94,000 that must be paid to the franchisor or affiliate, plus a development fee of $50,000 for the initial franchise plus $25,000 for each additional Restaurant if you acquire development rights (for a minimum of 2 Restaurants). [p.1, p.31]
What is the initial franchise fee?
The initial franchise fee is $50,000. This fee constitutes part of the franchisor's general operating funds and will be used as such in their discretion [p.239]. It is typically paid in full when you sign the Franchise Agreement, less any deposit previously paid under a Preliminary Agreement [p.12].
What are the ongoing royalty and advertising fees?
The franchise pays a weekly royalty fee of 5% of their 'Weekly Gross Sales' and an annual advertising fee of 2% of gross sales, both as defined in the individual franchise agreements. [p.99]
How long is the initial franchise agreement, and can I renew it?
This isn't specified in the excerpts.
Can I sell or transfer my franchise, and what does that require?
This isn't specified in the excerpts.
On what grounds can the franchisor terminate the agreement?
The franchisor can terminate the agreement if there is good cause, which includes the failure of the franchisee to comply with any lawful provision of the franchise agreement and failing to cure such failure after being given written notice and a reasonable opportunity to do so [p.5]. Additionally, the franchisor cannot use undue influence to induce the franchisee to surrender any rights under the franchise or cancel the franchise without reasonable cause [p.240].
What financial requirements — net worth and liquid capital — do I need to qualify?
This isn't specified in the excerpts.
Do I get an exclusive or protected territory?
Yes, you are granted an exclusive territory equal to a 1-mile radius from the front entrance of your Restaurant site. This means that within this area, Mellow Mushroom will not locate another franchisee's restaurant without your consent. However, Mellow Mushroom retains the right to engage in various business activities outside your exclusive territory, including delivering products into it and using other distribution channels like the Internet for sales. [p.50, p.230, p.51]
What training and ongoing support does the franchisor provide?
The franchisor provides initial training for the Managing Owner and up to two additional persons designated by the franchisee, including potential General Managers and other managers or assistant managers. This training lasts approximately five weeks but can be longer or shorter based on needs, and may include online or virtual components [p.138]. Additionally, if necessary, one more managerial-level employee will be trained within the first thirty days after the restaurant opens at no cost to the franchisee, except for transportation, room and board, wages, and other personal expenses [p.138]. The franchisor also supports various incentive and sponsorship programs aimed at strengthening the Mellow Mushroom System [p.135], and manages the Brand Fund to finance marketing, advertising, and brand-building activities [p.142].
How many franchised outlets are there, and how many have closed or been terminated?
As of September 30, 2024, there were 165 franchised outlets. According to [p.81], one outlet had its franchise agreement terminated, cancelled, or not renewed from October 1, 2023, to September 30, 2024.
Does the franchisor share any financial performance or earnings information?
The franchisor can provide actual records of an existing outlet if you purchase one. However, they do not make any representations about a franchisee's future financial performance or past financial performance of company-owned or franchised outlets [p.65]. If you receive other financial performance information or projections, you should report it to the franchisor and relevant authorities [p.65].
What am I restricted to selling, and where must I buy supplies?
You are restricted to selling pizza, sandwiches, and salads with beer, wine, and liquor for on-site consumption, as well as takeout service [p.193]. You must buy or lease fixtures, furniture, equipment, supplies, furnishings, other food products (besides those mentioned above), uniforms, and similar items from approved suppliers meeting Mellow Mushroom's minimum standards and specifications [p.34]. Specifically, you must buy tomato sauce/spice mix and pizza dough directly from a designated wholesaler that buys these products from Red Bud [p.33].