Smashburger Franchise Costs, Fees & Owner Salary (2023)

Smashburger, a leader in the fast-casual dining industry, is renowned for revolutionizing the burger experience. Established in Denver in June 2007, the brand quickly distinguished itself by offering high-quality, smashed-to-order burgers that cater to the discerning tastes of burger aficionados. This innovative approach, characterized by the use of certified Angus beef and a unique smashing technique, ensures each burger is packed with flavor and juiciness, setting Smashburger apart from conventional fast-food offerings​​​​.

Headquartered in Denver, Colorado, Smashburger embarked on its franchising journey in 2008, just a year after its inception. This strategic move was aimed at expanding its reach and making its unique burger experience accessible to a wider audience.

The rapid expansion and innovative dining concept of Smashburger have solidified its position as a leader in the fast-casual sector, attracting both burger lovers and entrepreneurial investors. The brand's commitment to quality, combined with a diverse menu that extends beyond burgers to include chicken, turkey, and black bean entrées, signature sides, and hand-spun milkshakes, ensures that Smashburger remains at the forefront of the "better burger" movement.

Initial Franchise Fee

The initial franchise fee is $40,000, payable when signing the Franchise Agreement. This fee is fully earned upon payment, non-refundable, and uniformly imposed.

Royalty Fee

The royalty fee is 5.5% of weekly Gross Sales, payable each Tuesday for sales in the preceding week.

Marketing Fund

Currently, the marketing fund fee is 2.25% of Gross Sales, with the possibility of increasing up to 4% of Gross Sales. This fee is paid weekly and is subject to a marketing cap, which aggregates all required marketing expenditures to 5% of Gross Sales​​.

Local Advertising

Franchisees may be required to spend up to 3% of their Gross Sales each calendar quarter on local advertising and promotion of their restaurant. This spending is subject to the same marketing cap mentioned above​​.

Proprietary Software and/or Technology Fee

As of the document's publication, there is no charge for proprietary software or technology. However, it is estimated that if implemented, this fee could range between $150 to $250 per month​​.

Transfer Fees

Transfer fees include $15,000 for Franchise Agreement transfers and the greater of 1% of the purchase price or $25,000 for Multi-Unit Development Agreement transfers, with additional fees for applications and balance payments.

Renewal Fees

The renewal fee is 50% of the then-current initial franchise fee, payable upon renewal.

Management Fees

Management fees are 10% of Gross Sales plus costs and expenses, incurred if the franchisor assumes management due to franchisee non-compliance or abandonment.

The franchisor provides comprehensive training for franchisees, covering various aspects of the business operation. The training includes:

Orientation/Training Overview

• This initial session involves 5 hours of classroom training, providing an overview of the franchise system and expectations.

Back of House Functional Training

• Focused on kitchen operations, this involves 42 hours of on-the-job training, equipping franchisees with the necessary skills to manage the back of house effectively.

Front of House Functional Training

• Similar in duration to the Back of House training, this segment also consists of 42 hours of practical training, focusing on customer service and front-end operations.

The training is conducted at a designated facility by the franchisor or virtually, depending on the circumstances. The program is designed to ensure that franchisees are well-prepared to operate their Smashburger restaurant, covering both the managerial and operational aspects of the business.

The franchisor provides a comprehensive training program for franchisees, which includes a blend of classroom and on-the-job training sessions. The initial training program includes:

• Orientation/Training Overview: Conducted either at a training facility designated by the franchisor or virtually, this session includes 5 hours of classroom training but does not require any on-the-job training.
• Back of House Functional Training: This is a hands-on training session with no classroom hours but includes 42 hours of on-the-job training, focusing on the operational aspects of the kitchen and food preparation areas. It's conducted at a designated training facility or virtually.
• Front of House Functional Training: Similar to the Back of House training, this session does not include classroom hours but involves 42 hours of on-the-job training. It covers the service and customer interaction areas of the restaurant and is also conducted at a designated training facility or virtually.

Additional details regarding the training include:

• The training is provided for up to four individuals, including the franchisee (and their Operating Partner) and their Designated Manager (if applicable), at a location designated by the franchisor, which may be virtual.
• For the first two Smashburger Restaurants opened by a franchisee or their affiliates, the franchisor sends a training team to the restaurant to assist with the grand opening at no additional cost. For the third or subsequent restaurants, a lead trainer is sent to assist with the grand opening, with the franchisee being responsible for reimbursing the costs and expenses incurred by the lead trainer and any other trainers or training team sent by the franchisor.
• The franchisor may require the franchisee, their Managing Owner, Designated Manager (if applicable), and previously trained and experienced employees to attend and satisfactorily complete various training courses periodically provided by the franchisor or third parties designated by the franchisor.

The Smashburger Franchise Disclosure Document outlines that franchisees can be granted territorial protection depending on certain conditions. Specifically, a franchisee's Development Area can be designated as "protected," which means that during the term of the Multi-Unit Development Agreement, the franchisor will not establish or license others to establish Smashburger Restaurants within the franchisee's Development Area, provided the franchisee complies with the Multi-Unit Development Agreement and all Franchise Agreements and other agreements with the franchisor and its affiliates.

However, this protection is subject to certain exceptions and conditions, and the franchisor reserves the right to conduct other business activities without regard to the franchisee's territorial protections.

It's important to note that if a Development Area is designated as "non-exclusive," the franchisor retains the freedom to grant development rights to others, grant franchises to others, own or operate Smashburger Restaurants, or conduct any business activities within the Development Area without any restrictions related to the franchisee's rights​​​​.

For Smashburger franchisees under a Multi-Unit Development Agreement, there is a specific requirement for active involvement in the management and operation of the franchise. If the franchisee is an entity, it must designate a Managing Owner who is a natural person holding at least a 25% ownership interest and voting power in the entity.

This Managing Owner, whose appointment may require approval from Smashburger, is expected to devote a significant amount of time to the supervision, management, and operation of the franchise, ensuring adherence to Smashburger's standards and promoting the success of the business.

This arrangement indicates that while a franchisee can have a management structure in place, there must be a significant commitment from a principal owner to oversee the franchise operations.