In this exclusive Franchise Chatter FDD Talk post, you’ll learn the following:

Section I – Estimated initial investment (franchise costs) for a Zaxby’s franchise, based on Item 7 of the company’s 2024 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Zaxby’s franchise, based on Items 5 and 6 of the company’s 2024 FDD

Section III – Number of franchised and company-owned Zaxby’s outlets at the start of the year and the end of the year for 2021, 2022, and 2023, based on Item 20 of the company’s 2024 FDD

Section IV – News updates on the Zaxby’s franchise opportunity

Section V – Presentation and analysis of Zaxby’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2024 FDD, including information on the:

• 2023 average, median, highest, and lowest gross revenues for the 768 franchised Zaxby’s restaurants that were open and operating during the period from January 2, 2023 through December 31, 2023, by quartile

• 2023 average gross revenue, cost of goods sold, cost of labor, and certain expenses (royalties, advertising expenses, technology services fee) for the 143 affiliate Zaxby’s restaurants that were open and operating during the period from January 2, 2023 through December 31, 2023, by quartile

• 2021, 2022, and 2023 average, median, lowest, and highest gross revenues for the franchised Zaxby’s restaurants that were open and operating for all 52 weeks of the applicable fiscal year (the 2021 data includes the financial performance of franchised Zaxby’s restaurants that were open and operating for at least 51 of the 52 weeks of fiscal year 2021)

Section VI – Key ratios, comparables, computations, and analyses for the Zaxby’s franchise opportunity (exclusive content for Platinum subscribers)

Section I – Zaxby’s Franchise Costs

• Initial Franchise Fee:  $35,000
• Lease Deposit and Payment:  $10,000 to $19,000
• Utility Deposits:  $0 to $9,000
• Building and Sitework:  $772,000 to $2,200,000
• Architect and Engineer:  $45,000 to $75,000
• Permits and Licenses:  $2,000 to $24,000
• Accounting and Legal Fees:  $500 to $25,000
• Furniture, Fixtures, and Equipment Package:  $425,000 to $497,000
• Technology System:  $60,200 to $92,200
• Signage:  $23,000 to $134,000
• Insurance:  $1,000 to $17,000
• Printing/Business Supplies:  $300 to $1,000
• Initial Marketing Contribution:  $5,200 to $10,000
• Initial Inventory:  $5,000 to $22,000
• Uniforms:  $1,500 to $5,000
• Training Expenses:  $10,000 to $25,000
• Pre-Opening Payroll:  $10,000 to $37,000
• Additional Funds for 3 Months:  $1,000 to $96,000
• Total Estimated Zaxby’s Franchise Costs:  $1,406,700 to $3,323,200

Section II – Zaxby’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Initial Franchise Fee:  $35,000

• Royalty:  6% of Gross Sales for the preceding week

• Weekly Marketing Contributions:  up to 4% of Gross Sales per week (which includes the National Marketing Fund Contribution and either the Co-op Marketing Contribution or the Multi-DMA Advertising Contribution, as described below)

• National Marketing Contribution:  currently, 1.5% of Gross Sales per week (may be modified by Zaxby’s in its discretion but will not exceed 3.5% of Gross Sales)

• Co-op Marketing Contribution or Multi-DMA Advertising Contribution:  up to 3% of Gross Sales per week (as determined by Co-op, Zaxby’s, or its designated affiliate); however, the members of your Co-op may vote to increase the Co-op Marketing Contribution above the 3% cap

Section III – Number of Franchised and Company-Owned Zaxby’s Outlets

Franchised

2021

• Outlets at the Start of the Year:  762
• Outlets at the End of the Year:  765
• Net Change:  +3

2022

• Outlets at the Start of the Year:  765
• Outlets at the End of the Year:  776
• Net Change:  +11

2023

• Outlets at the Start of the Year:  776
• Outlets at the End of the Year:  796
• Net Change:  +20

Company-Owned

2021

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  146
• Net Change:  0

2022

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  146
• Net Change:  0

2023

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  145
• Net Change:  -1

Section IV – News Updates on the Zaxby’s Franchise

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Zaxby’s Franchise (Item 19, 2024 FDD)

• As of December 31, 2023, there were 941 open and operating Restaurants. Of these 941 Restaurants, 796 of these Restaurants were owned and operated by third-party franchisees that are not owned or controlled by Zaxby’s affiliates (the “Franchised Restaurants”).

• The Franchised Restaurants offer substantially the same products and services as the Restaurants that are the subject of the franchise disclosure document.

• For purposes of this Item 19, the term “Gross Revenues” means all revenues received by a Restaurant as payment for all sales generated through the Restaurant, whether such payment is in cash, by exchange or for credit (and, if for credit, regardless of collection), including revenues received from the operation of vending machines or other mechanical devices, less any revenues taxes collected and transmitted to appropriate taxing authorities.

• The financial performance representation is a historical representation.

Part 1 – Average Gross Revenues of Franchised Restaurants in Fiscal Year 2023

• Part 1 presents the Average Gross Revenues of 768 Franchised Restaurants (the “Part 1 Measured Restaurants”) that were open and operating during the period January 2, 2023 through December 31, 2023 (the “Part 1 Period”).

• Part 1 excludes the performance of: (a) 145 Restaurants that were owned or controlled by Zaxby’s affiliate, Zax Restaurants; (b) 3 Franchised Restaurants that were closed for more than one month during the Part 1 Period; (c) 25 Franchised Restaurants that opened during the Part 1 Period; and (d) 6 Franchised Restaurants that closed during the Part 1 Period.

• The Part 1 Measured Restaurants were divided into four categories based on their Gross Revenues, which are classified as: Top Quartile, Second Quartile, Third Quartile. and Bottom Quartile. In Part 1, the average Gross Revenues for each of the categories was calculated by adding the Gross Revenues of all Part 1 Measured Restaurants within each quartile and dividing by the total number of Part 1 Measured Restaurants within such quartile. The average Gross Revenues in each quartile were then compared to the average Gross Revenues in such quartile and expressed as a percentage.

Top Quartile

• Restaurant Count:  192
• Average Gross Revenues:  $3,803,297
• Number of Restaurants Above Average Gross Revenues:  76
• Percentage of Restaurants Above Average Gross Revenues:  39.6%
• Median Gross Revenues:  $3,658,831
• Lowest Gross Revenues:  $3,190,312
• Highest Gross Revenues:  $5,989,909

Second Quartile

• Restaurant Count:  192
• Average Gross Revenues:  $2,908,230
• Number of Restaurants Above Average Gross Revenues:  99
• Percentage of Restaurants Above Average Gross Revenues:  51.6%
• Median Gross Revenues:  $2,920,134
• Lowest Gross Revenues:  $2,651,280
• Highest Gross Revenues:  $3,188,384

Third Quartile

• Restaurant Count:  192
• Average Gross Revenues:  $2,410,678
• Number of Restaurants Above Average Gross Revenues:  99
• Percentage of Restaurants Above Average Gross Revenues:  51.6%
• Median Gross Revenues:  $2,424,250
• Lowest Gross Revenues:  $2,158,054
• Highest Gross Revenues:  $2,650,942

Bottom Quartile

• Restaurant Count:  192
• Average Gross Revenues:  $1,762,691
• Number of Restaurants Above Average Gross Revenues:  114
• Percentage of Restaurants Above Average Gross Revenues:  59.4%
• Median Gross Revenues:  $1,839,320
• Lowest Gross Revenues:  $786,417
• Highest Gross Revenues:  $2,155,998

All Measured Restaurants

• Restaurant Count:  768
• Average Gross Revenues:  $2,721,224
• Number of Restaurants Above Average Gross Revenues:  350
• Percentage of Restaurants Above Average Gross Revenues:  45.6%
• Median Gross Revenues:  $2,651,111
• Lowest Gross Revenues:  $786,417
• Highest Gross Revenues:  $5,989,909

Part 2 – Average Gross Revenues and Certain Operating Costs and Expenses of Affiliate Restaurants for Period from January 2, 2023 to December 31, 2023

• Part 2 presents the average Gross Revenues and certain operating costs and expenses of 143 Affiliate Restaurants (the “Part 2 Measured Restaurants”) that were open and operating during the period from January 2, 2023 to December 31, 2023 (the “Part 2 Period”).

• Part 2 excludes the performance of: (a) 2 Affiliate Restaurants that were closed for more than one month during the Part 2 Period; and (b) 1 Restaurant permanently closed during the Part 2 Period.

Top Quartile (35 Restaurants)

Average Gross Revenue:  $3,415,904 (100.0%)

Cost of Goods Sold:  $1,114,526 (32.6%)

Total Cost of Labor:  $871,845 (25.5%)

Certain Expenses

• Royalties:  $203,478 (6.0%)
• Advertising Expenses:  $144,642 (4.2%)
• Technology Services Fee:  $4,088 (0.1%)

Second Quartile (36 Restaurants)

Average Gross Revenue:  $2,702,242 (100.0%)

Cost of Goods Sold:  $887,938 (32.9%)

Total Cost of Labor:  $729,607 (27.0%)

Certain Expenses

• Royalties:  $160,957 (6.0%)
• Advertising Expenses:  $111,566 (4.1%)
• Technology Services Fee:  $3,337 (0.1%)

Third Quartile (36 Restaurants)

Average Gross Revenue:  $2,248,377 (100.0%)

Cost of Goods Sold:  $748,407 (33.3%)

Total Cost of Labor:  $645,921 (28.7%)

Certain Expenses

• Royalties:  $133,865 (6.0%)
• Advertising Expenses:  $101,518 (4.5%)
• Technology Services Fee:  $2,774 (0.1%)

Bottom Quartile (36 Restaurants)

Average Gross Revenue:  $1,535,048 (100.0%)

Cost of Goods Sold:  $521,514 (34.0%)

Total Cost of Labor:  $511,525 (32.7%)

Certain Expenses

• Royalties:  $91,287 (5.9%)
• Advertising Expenses:  $80,850 (5.3%)
• Technology Services Fee:  $1,932 (0.1%)

Average (Calculated by Franchise Chatter)

Average Gross Revenue:  $2,475,393 (100.0%)

Cost of Goods Sold:  $818,096 (33.0%)

Total Cost of Labor:  $689,724 (27.9%)

Certain Expenses

• Royalties:  $147,397 (6.0%)
• Advertising Expenses:  $109,644 (4.4%)
• Technology Services Fee:  $3,033 (0.1%)

• The Part 2 Measured Restaurants were divided into four categories based on their Gross Revenues, which are classified as: Top Quartile, Second Quartile, Third Quartile and Bottom Quartile.

• In Part 2, the Gross Revenues and average operating costs and expenses for each of the categories were calculated by adding the Gross Revenues or certain operating costs and expenses, as applicable, of all Part 2 Measured Restaurants within each quartile and dividing by the total number of Part 2 Measured Restaurants within such quartile.

• The average Gross Revenues and average operating costs and expenses in each quartile were then compared to the average Gross Revenues in such quartile and expressed as a percentage.

• Part 2 is not a profit and loss statement. The cost and expense information in Part 2 pertains only to the cost of goods sold, labor costs, and certain expenses experienced by the Part 2 Measured Restaurants. You may experience capitalized or other balance sheet expenditures that are not included in this cost and expense information, such as the cost of additional or replacement equipment, debt payments, and interest expenses.

• New franchisees will pay Royalties, Advertising Expenses (comprised of (i) the National Marketing Contribution, and (ii) the Co-op Marketing Contribution or Multi-DMA Advertising Contribution), and the Technology Services Fee.

• Labor costs in Part 2 do not include officers’ salaries and benefits for any Part 1 Measured Restaurant that captures or recognizes that expense.

• Labor costs will vary from location to location and will depend on local factors, including (without limitation) local minimum wage laws and local labor market conditions.

• Because each Restaurant will need a certain number of employees to open and operate regardless of its Gross Revenues, Restaurants that have lower than average Gross Revenues typically experience higher than average labor costs as a percentage of Gross Revenues.

Part 3 – Average Annual Gross Revenues of Franchised Restaurants in Fiscal Year 2021, 2022, and 2023

• Part 3 below shows the average annual Gross Revenues of Franchised Restaurants for Zaxby’s 2021, 2022, and 2023 fiscal years.

2021

• Restaurant Count:  727
• Average Gross Revenues:  $2,544,354
• Percentage Change Over Previous Year:  12.8%
• Number of Restaurants Above Average Gross Revenues:  344
• Percentage of Restaurants Above Average Gross Revenues:  47.3%
• Median Gross Revenues:  $2,497,295
• Lowest Gross Revenues:  $839,494
• Highest Gross Revenues:  $5,331,733

2022

• Restaurant Count:  752
• Average Gross Revenues:  $2,662,422
• Percentage Change Over Previous Year:  4.6%
• Number of Restaurants Above Average Gross Revenues:  355
• Percentage of Restaurants Above Average Gross Revenues:  47.2%
• Median Gross Revenues:  $2,599,688
• Lowest Gross Revenues:  $890,988
• Highest Gross Revenues:  $5,869,839

2023

• Restaurant Count:  768
• Average Gross Revenues:  $2,721,224
• Percentage Change Over Previous Year:  2.2%
• Number of Restaurants Above Average Gross Revenues:  350
• Percentage of Restaurants Above Average Gross Revenues:  45.6%
• Median Gross Revenues:  $2,651,111
• Lowest Gross Revenues:  $786,417
• Highest Gross Revenues:  $5,989,909

• Zaxby’s 2021 fiscal year began on December 28, 2020 and ended on December 26, 2021.

• Zaxby’s 2022 fiscal year began on December 27, 2021 and ended on December 25, 2022.

• Zaxby’s 2023 fiscal year began on January 2, 2023 and ended December 31, 2023 (adjusted for 52 weeks).

• The 2021 data includes the Gross Revenues of 727 Franchised Restaurants that were open and operated for at least 51 of the 52 weeks of the 2021 fiscal year and excludes the performance of: (a) 29 Franchised Restaurants that temporarily closed for more than one week during the 2021 fiscal year; and (b) 9 Franchised Restaurants that opened during the 2021 fiscal year.

• The 2022 data includes the Gross Revenues of 752 Franchised Restaurants that were open and operated during the 2022 fiscal year and excludes the performance of: (a) 7 Franchised Restaurants that temporarily closed for more than one month during 2022 fiscal year; and (b) 17 Franchised Restaurants that opened during the 2022 fiscal year.

• The 2023 data includes the Part 1 Measured Restaurants.

• Some Restaurants have sold or earned this amount. Your individual results may differ. There is no assurance that you’ll sell or earn as much.

• This Item 19 was prepared utilizing data Zaxby’s received in the periodic sales reports provided to it by its franchisees and through daily polling of Point of Sale (POS) data. Zaxby’s has not independently verified any of the data provided to it, but its franchisees pay its franchising fees based on such reports. Additionally, Zaxby’s cannot verify that the information it receives from its franchisees is prepared uniformly or that its franchisees properly allocate costs to a particular category.

Section VI – Zaxby’s Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️