Pizza Inn Says No Royalties, Willing to Single Dip for Now

Pizza Inn has announced they will eliminate royalties in an effort to assist franchise owners. A journal that we give tremendous credit to, PizzaMarketPlace.com, named this chain as the 2008 Chain of the Year - Pizza chain that is.  But this gesture of kindness has some franchise experts wondering how vast are the hidden royalties in this chain.

The program includes a zero-percent royalty incentive for a location’s first year of operation and 2 percent royalty for the second year, The Colony-based Pizza Inn said Thursday.

Pizza Inn (NASDAQ: PZZI) said franchisees for the remainder of the relationship will have a royalty of 4 percent of gross fees. Franchisees that already have existing locations also will benefit from multiunit agreements that will award entrepreneurs for taking on new locations. Under the agreements, the first restaurant will be $25,000, the second $18,750 and three or more restaurants will be $12,500. [Dallas Business Journal]

Regarding this story, a franchise consultant with many years in the industry told me, "What they are not telling you is that they are also profiting from the supply side; meaning all supplies, foodstuff, etc., is purchased through either an affiliated company or them directly.  That means they have been “double-dipping” for years, so to speak.