What does 'EBITDAR' mean in the context of Lees Famous Recipe's financial performance?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
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- "4-Wall EBITDAR" is the amount that remains when all expenses listed in the Franchise Adjusted Income Statement are subtracted from Gross Sales. "EBITDAR" means Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent.
We have not included depreciation, amortization, income tax, and debt service related to the remodel or build-out or operation of the location. We have not included rent as some franchisees may lease or choose to own the location and rent expense may vary by market and type of location. Franchisees may have depreciation or amortization deductions from certain equipment or costs to acquire a location. We have not made any provisions for debt service related to these or other items. We do not include an allowance for above store general and administrative costs such as accounting, bookkeeping, and general administration as franchisees may personally perform some or all of these services.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 59–66)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, '4-Wall EBITDAR' is a key metric used in their Franchise Adjusted Income Statement. The document explicitly defines EBITDAR as "Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent." This means that when calculating 4-Wall EBITDAR, these expenses are not subtracted from gross sales. The 4-Wall EBITDAR represents the amount remaining after subtracting all other listed expenses from gross sales. In 2024, the average 4-Wall EBITDAR for affiliate-owned stores was $413,177, representing 19.0% of gross sales, while the median was $356,351, or 18.0% of gross sales.
For a prospective Lees Famous Recipe franchisee, understanding EBITDAR is crucial because it provides a view of the restaurant's operational profitability before considering financial and ownership structure factors that can vary significantly from one franchisee to another. By excluding interest, taxes, depreciation, amortization, and rent, the EBITDAR focuses on the core operational efficiency of the restaurant itself. This allows potential franchisees to assess the underlying earning potential of the Lees Famous Recipe business model, independent of financing decisions, tax strategies, or real estate arrangements.
However, the FDD also clarifies what is NOT included in the EBITDAR calculation. Lees Famous Recipe does not include depreciation, amortization, income tax, or debt service related to the remodel, build-out, or operation of the location. Rent is also excluded because franchisees may lease or own their location, leading to variable rent expenses. Additionally, the calculation does not account for above-store general and administrative costs like accounting or bookkeeping. Therefore, while EBITDAR offers a valuable snapshot of operational earnings, a prospective franchisee must consider these additional costs to determine their actual net profit. Franchisees should conduct their own independent investigation of costs and expenses to fully understand the financial implications of operating a Lees Famous Recipe franchise.