As part of being able to better advise potential franchisees on the best franchises for them to become a part of, I am always doing a lot of research.
From the research I’ve done, which includes look at SBA loan data and more, Cinnabon’s 15% franchise failure rate after 3 years isn’t something to be taken lightly.
And I say that knowing that it’s frankly a pretty good failure rate when starting a business and particularly when you compare it to the typical failure rates of normal companies.
With that said, I don’t think the failure rate should be taken lightly either. There’s always something to be said and reasons why you should question whether it is the right choice to get a franchise through Cinnabon.
Individuals who come to me and ask for advice often consider the failure rate of the company as the main consideration in choosing a company, which it shouldn’t be.
It’s easy to look at a failure rate and let it dominate your narrative. When you commit to a franchise, you’re committing to a lifestyle for a considerable amount of time. It’s important to know if the choice is right for you in context of your life.
Cost
Whether you’re opening an IV therapy clinic, a Mexican restaurant, or an Anytime Fitness, it comes at a cost. In comparison, opening a Cinnabon franchise costs between $255,000 and $657,000. Of that, $30,500 is paid as a franchise fee to the company to get started. The standard terms included ranges over 20 years.
All of this stuff isn’t at all bad, and the company has been offering franchising since 1986. It puts them as one of the more seasoned franchise providers on the market. With roughly 1,000 US stores around, they’re slinging some baked goods to US consumers!
Requirements
In order to start a Cinnabon, there’s a requirement of you having $120k in liquid assets with a minimum net worth of $300k. In addition, the requirement to spend upwards of almost $700k makes it a big decision.
It’s not as simple as just getting a bakery location. Experience in the hospitality sector is something the company much prefers in addition to owners that are people-oriented. When you’re choosing to start a location, you’ll likely be interacting with customers personally for a period of time. If you’re people-oriented, this transcends the business and becomes a positive experience the customer has with the brand. The overall franchise benefits from this the same way you benefit from other franchisees displaying the brand in a positive manner, if you choose to become a franchise owner.
Types
While the numbers above reflected a situation in which you are opening what they call a “full bakery,” you should know there are other options.
Here’s a brief look at the options:
- Full bakery: These are typically in-line or kiosk locations, featuring the full range of products offered by Cinnabon.
- Express Bakery: These locations only sell a limited selection of products offered by the company. They’re typically inside another business approved by the franchisor.
- Concession: If you think a fair, market, or other special event. They’re only able to sell a limited selection of products offered.
- Auntie Anne’s Co-Branded Bakery: This type of bakery not only sells Cinnabon products but also a number of products available through Auntie Anne’s franchise system.
- Swirl Bakery: This is an often where you get to sell Cinnabon products in addition to select Carvel products.
- Swirl Bakery: You’re offering a unique menu as this is a Carvel-cobranded bakery with the Cinnabon Swirl mark. There is a selection of ingredients offered from both brands.
On-going fees
I often review certain franchise opportunities for individuals I work with just to discover that their structures are completely unreasonable. You will always want to review the fee structures of the companies you’re considering partnering up with to make sure they not just seem reasonable but that they’re within the norms of the industry.
Different types of companies have slightly different fee structures when it comes to franchising.
You’ll be paying a 6% royalty fee of net sales to Cinnabon in addition to a 3% advertising fee. This is in addition to 1% of sales required to be spent on local advertising.
Having those fees add up to no more than 10% is definitely within the realm of reason and not as aggressive as some other franchising companies. While they’re not the only fees encountered, other fees can be explored when you’re considering moving forward.
At the end of the day, you need to remember that starting a business is a lot of work, even if it’s a franchise like Cinnabon. No one is going to come in and do the work for you, so you’ll both need to make sure that slinging baked goods is a good business and something you enjoy. As they say, the devil’s in the detail, so you’ll need to review as much information you can before you choose to potentially move forward with a company like Cinnabon.
