What is a tenant improvement allowance, as it relates to opening an Auntie Annes franchise?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
s based on an endcap or free-standing location with a drive-thru. This estimate does not include leasehold improvements for new free-standing buildings with a drive-thru, as the costs for this format may vary significantly. For a Cinnabon Co-Branded Shop, the estimate is based on a mall or streetside location.
You may be able to negotiate tenant improvement allowances from your landlord. The estimate is presented net of estimated tenant
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 44–54)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, a tenant improvement allowance is a potential negotiation point with your landlord to offset some of the costs associated with building out your franchise location. The FDD indicates that franchisees may be able to negotiate these allowances.
Specifically, the estimated initial investment presented in the FDD is net of estimated tenant improvement allowances. This means the listed costs already factor in potential reductions if you secure an allowance. The low estimate assumes a $2,500 tenant improvement allowance, which Auntie Annes states is approximately the average reported by franchisees in recent years. The high estimate, on the other hand, assumes no tenant improvement allowance is available, representing a scenario where you would bear the full cost of construction and build-out.
For prospective Auntie Annes franchisees, this means that the initial investment can vary significantly depending on the tenant improvement allowance you can negotiate. It's crucial to understand that securing an allowance is not guaranteed, and the actual amount can differ. Therefore, when budgeting for your franchise, it's wise to consider both scenarios: one with an allowance and one without, to accurately assess the potential financial commitment.
The FDD also highlights that construction and build-out costs, which tenant improvement allowances can help offset, include expenses for a general contractor to build out the shop to meet Auntie Annes' standards, including HVAC, electrical work, carpentry, floor covering, and painting. These costs can vary widely based on factors like the size and condition of the premises and local market rates for materials and labor, especially in major metropolitan areas.