What is the relationship between the initial franchise fee installments for Bambu in Item 5 and the leasehold improvement costs listed in Item 7?
Bambu Franchise · 2025 FDDAnswer from 2025 FDD Document
The initial franchise fee ("Initial Franchise Fee") is $49,000. The Initial Franchise Fee is due in four installments: (1) a non-refundable payment of $15,000 due when you sign the Franchise Agreement for your Bambū shoppe; (2) a non-refundable payment of $10,000 when your lease for your Bambū shoppe is presented to us for review; (3) a non-refundable payment of $15,000 when you take possession of the leased premises, and (4) a non-refundable payment of $9,000 when your opening training program is scheduled.
Note 2: Leasehold Improvements. Your cost to build-out a location for a Bambū shoppe will vary greatly. The square footage of the location, the as-is condition, tenant improvement allowances from the landlord, and the type and availability of utilities and services are typically the largest monetary items affecting your shoppe buildout. A second-generation restaurant or QSR location with an existing kitchen and plumbing will significantly reduce these costs depending on final layout. Bambū shoppes are divided into two distinct areas, the kitchen area and the front of the house, also called the customer service and seating area. The kitchen area, bathrooms and the storage and maintenance area, which in total typically requires approximately 400-500 sq. ft. of space, is the most expensive to build out. The front of the house can be almost any size but having 500-600 sq. ft. for seating and front counter is typically sufficient. In the situation where there is an existing kitchen there is usually no tenant improvement allowance from the landlord. In space that is commonly called Vanilla Shell or Gray Shell, the cost of to build out the space is much greater because the space is basically four walls with utilities stubbed in. However, landlords often will provide a tenant improvement allowance or rent abatement as part of the lease to cover some or all of the cost of build-out.
The costs shown in the chart are estimated costs to build out space in an in-line leased location of approximately 1,100 sq. ft. The lower estimate in the chart assumes you have obtained built-to-suit lease space, or it is "move-in-ready" space. But each situation is unique and needs to be reviewed and negotiated with the landlord. The most important factors, however, are finding the best locations and then what type of spaces are available once those locations are identified.
What This Means (2025 FDD)
According to Bambu's 2025 Franchise Disclosure Document, the initial franchise fee and leasehold improvement costs are separate and distinct expenses, but the timing of one installment of the franchise fee is directly related to securing a lease. The initial franchise fee for a Bambu franchise is $49,000, payable in four installments. A $10,000 installment is due when the franchisee presents their lease for the Bambu shoppe to the franchisor for review. Leasehold improvements, detailed in Item 7, cover the costs to build out the location. These costs can vary significantly based on factors like the location's square footage, existing condition, and any tenant improvement allowances provided by the landlord.
The FDD notes that build-out costs are heavily influenced by whether the location is a second-generation restaurant or a vanilla/gray shell space. Second-generation restaurants with existing kitchens and plumbing can significantly reduce costs. Conversely, vanilla or gray shell spaces, which are essentially four walls with utilities stubbed in, incur much higher build-out expenses. Landlords may offer a tenant improvement allowance or rent abatement to offset these costs, but this is subject to negotiation. The estimated costs in Item 7 are based on an approximately 1,100 sq. ft. in-line leased location. The lower estimate assumes a "move-in-ready" space or a built-to-suit lease, while each situation is unique and requires careful review and negotiation with the landlord.
Therefore, while the initial franchise fee is a fixed cost paid to Bambu, the leasehold improvement costs are variable and depend on the specific location and lease terms. The second installment of the initial franchise fee is triggered by the lease, highlighting the importance of securing favorable lease terms to manage the overall investment. Prospective franchisees should carefully consider the potential leasehold improvement costs and negotiate with landlords to minimize these expenses, as they can significantly impact the total initial investment.