Penn Station
Penn Station offers upscale East Coast-style cheesesteaks and subs in franchised restaurants. Known for high-quality sandwiches, it operates in the quick-service restaurant sector.
Penn Station franchise FAQ
How much does it cost to open one — the total initial investment?
The total initial investment necessary to begin operation of a single Penn Station franchise ranges from $473,793 to $764,940. This includes the $28,500 initial franchise fee and site development fee that must be paid to Penn Station, Inc., as stated in [p.1].
What is the initial franchise fee?
The initial franchise fee is not specified in these excerpts, and it is noted that no initial franchise fee is due upon renewal of an existing agreement [p.152, p.103]. However, for new franchises or renewals under a full-term agreement, the fee is 50% of the then-current initial franchise fee [p.12], which amount is non-refundable [p.12].
What are the ongoing royalty and advertising fees?
The ongoing royalty fee is based on a percentage of Net Sales, which varies depending on the amount of sales. For Net Sales up to $30,000.00 during the Applicable Five Year Period, there is no royalty fee (0.0%). After the end of this period, if Net Sales are less than or equal to $30,000.00, a 2.0% fee applies. For higher sales amounts, the fees increase in steps up to 8.0%. Additionally, Franchisees must pay national fund fees for promoting the Penn Station brand, which are due on the same date as monthly royalty payments [p.154, p.17].
How long is the initial franchise agreement, and can I renew it?
The initial term of the franchise agreement is not specified in the provided excerpts. However, if applicable, for the renewal of a franchise agreement having a 10-year initial term, certain amended terms and conditions may apply [p.150].
Can I sell or transfer my franchise, and what does that require?
You can sell or transfer your ownership interests in the franchise, but it requires consent from the franchisor. Additionally, you need to pay a $1,000 transfer fee if the franchisor consents to certain types of transfers as specified [p.19]. This isn't specified in the excerpts for other types of transfers.
On what grounds can the franchisor terminate the agreement?
According to [p.5], the franchisor can terminate the franchise agreement for good cause, which includes the failure of the franchisee to comply with any lawful provisions of the franchise agreement and to cure such failure after being given written notice and a reasonable opportunity (no more than 30 days) to do so.
What financial requirements — net worth and liquid capital — do I need to qualify?
This isn't specified in the excerpts. The provided FDD does not detail specific net worth or liquid capital requirements for franchisees to qualify.
Do I get an exclusive or protected territory?
Yes, you do get an exclusive or protected territory. Specifically, your franchise agreement offers you an exclusive territory within a one-mile radius around the site of your restaurant, unless certain conditions are met (such as defaulting on obligations). Additionally, if applicable, multi-unit and single-unit development agreements provide further exclusivity based on negotiated territories. [p.50, p.51]
What training and ongoing support does the franchisor provide?
The franchisor provides a Training Program for the Managing Owner and the Designated Owner, which includes future training programs developed for all franchisees. Additionally, Penn Station offers on-site assistance for approximately two to four days before opening and during part of the first week of operations [p.104].
How many franchised outlets are there, and how many have closed or been terminated?
This isn't specified in the excerpts.
Does the franchisor share any financial performance or earnings information?
Yes, the franchisor shares financial performance information under certain conditions. According to [p.56] and [p.54], better performing franchisees are required to share results of their Restaurant's financial performance with their General Managers and Managing Owners respectively. Additionally, [p.19] indicates that the franchisor may provide actual records of an existing outlet if a prospective franchisee is purchasing one. However, this isn't specified in the general financial performance representations made by the franchisor to all potential franchisees.
What am I restricted to selling, and where must I buy supplies?
You are required to purchase certain supplies from the franchisor's designated suppliers, such as food, produce, bread, paper, and janitorial supplies. While you may seek consent to use alternative suppliers for some items, you cannot contract with an alternative supplier if a specific authorized supplier has been mandated by the franchise agreement [p.25]. As for sales restrictions, you are permitted to sell products to customers outside your Restricted Territory without compensating other franchisees [p.51], but operating restrictions may prohibit you from operating a similar business during the term of the franchise and control aspects like location, access to customers, what you sell, marketing, and hours of operation [p.3].