Founded in 2006 in Taiwan, Happy Lemon initially brought and expanded its brand in Mainland China and Hongkong until it expanded with more than 350+ locations across 21 countries including the USA, Canada, Australia, UK, and many more. The goal of this blog post is to highlight the initial and ongoing financial demands of purchasing a Happy Lemon franchise. You can also find a copy of a publicly filed disclosure document at the end of this post. Please note, Waldrop & Colvin has no affiliation with the franchisor.
Waldrop & Colvin is a franchise law firm and we help entrepreneurs evaluate franchise opportunities so they can make informed decisions.
Our blog posts only contain a small amount of the information you will need to consider when purchasing a franchised business. You can learn more about franchising and franchise law by exploring our site (Overview of federal franchise law and State-by-State franchise requirements). Regardless of whether you consider this franchisor or another franchise opportunity, it would be our pleasure to provide legal support. We offer fixed fee franchise disclosure document review (“FDD Review”).
The Cost to Open a Happy Lemon Franchised Outlet
Interested in opening your own Happy Lemon franchise business? Expect to invest between $289,000 to $607,000 to launch your first Happy Lemon store. This is what Happy Lemon estimates it will cost you to get your location ready to open and operate for 3 months according to its 2023 franchise disclosure document (“FDD”), which is on file with the NASAA electronic filing depository.
The Initial Franchise Fee
Franchisors charge an initial fee to launch a franchise business. The initial fee is typically due when you sign the franchise agreement and is typically earned on receipt. The initial fee is the “buy in” cost you must pay in order to gain access to the franchise opportunity. As of 2023, the initial franchise fee is $20,000 for each franchised location. This fee goes to Yummy-town USA, LLC when you sign a franchise agreement. This amount is relatively low compared to many franchisors.
The Startup Expenses
Launching any restaurant requires a significant capital investment. The largest cost is often the construction or build-out cost, but there are many components that go into planning and executing the launch of a new location. For example, startup fees include the technology set-up fee, store pre-opening fee, initial training expenses, rent and deposit, architect fees, engineering plans, construction, remodeling, decorating, signage, leasehold improvements, fixtures and furniture, equipment, opening inventory and supplies, insurance, security and utility deposits, licenses, permits, certificates and other prepaid expenses, legal and accounting costs, computers, point of sale system and related software, and certain other items.
A full run down of the initial estimated expenses are laid out in Item 7 of the Happy Lemon’s Franchise Disclosure Document (“FDD”).
The architect fees, engineering plans, construction, remodeling, decorating, signage, leasehold improvements, fixtures and furniture make up a bulk of the estimated startup costs.
The Operating Expenses
All businesses need working capital on day 1 in order to successfully launch and maintain operations. The amount is often uncertain, but franchisors are able to provide an estimate based on their experience. According to the 2023 FDD, you will need $20,000 to $80,000 in cash on hand to operate a Happy Lemon franchise location for the first three months. This amount does not include any rental and related occupancy costs, finance charges, interest or debt service obligations, taxes, royalties or owner’s salary or draw. You will need to plan to ensure you maintain liquidity. Launching a new restaurant often requires a significant investment in marketing to attract a customer base and retain talent.
The Ongoing Expenses Due to Happy Lemon
You will naturally incur ongoing operating expenses for any business. The franchise relationship typically involves ongoing support and an ongoing obligation to pay certain royalty fees. As of 2023, Happy Lemon collects 7% of Gross Revenues from the previous royalty period as ongoing royalty fee on a monthly basis. Additional fees paid to the franchisor are included in Item 6 of the FDD.
Paying ongoing royalties and fees is the cost of doing business. You pay these fees in exchange for the franchisor allowing you to take advantage of their “know how” and use their marks, systems, and processes to offer their products and services.
Does Happy Lemon Negotiate With Prospects?
Maybe.
Dr. Chester L. Karrass wrote a book entitled: In business as in life, you don’t get what you deserve, you get what you negotiate. Our experience has found this adage to be true.
You should consult with a franchise attorney about negotiating the business and legal terms of every franchise agreement.
Are There Happy Lemon Franchise Requirements To Participate In Day-To-Day Operations?
Any store requires full time attention and management. Happy Lemon’s franchise agreement provides that the franchisee must have at least 2 store managers to manage and supervise a Happy Lemon store. Each store manager must supervise and personally participate in the direct operation of the franchised business.
How Many Franchised Locations?
Franchisors disclose the total number of outlets in operation in Item 20 of the FDD. Over at least the past 3 years, franchised outlets have increased at a consistent and steady rate. Overall, the franchisor has grown from 48 franchised outlets on January 1, 2020, to 91 franchised outlets on December 31, 2022. No outlets have been terminated or reacquired in the past 3 years. Current outlets are located in California, Colorado, Florida, Hawaii, Illinois, Massachusetts, Nevada, New Jersey, New York, Oregon, Texas and Washington.
Where Can I Find The 2023 Happy Lemon Franchise FDD?
Click here for a copy of the Happy Lemon 2023 FDD on file with the NASAA electronci filing depository. Please note, this disclosure document may may not be in its current form or approved in all states. We have no affiliation with Happy Lemon and relied on publicly available information to compile this blog post. Minor changes may occur in the FDD, or the franchisor may not be authorized to offer franchises in your state. You should consult with franchise counsel and reach out to the franchisor directly if you are seriously considering a franchise opportunity.
Need Assistance? We can help!
Have questions? Talk to one of our firms franchise attorneys today. You can call franchsie attorney Derek A. Colvin directly at (757) 651-3490, or send Derek an email at [email protected]. The attorneys at Waldrop & Colvin excel at empowering clients to make informed decisions and we love supporting entrepreneurs as they explore opportunities in franchising. We would be honored to provide legal guidance as you explore an opportunity with any franchisor.
Meet the Author:
Christine Bontuyan is a lawyer in the Philippines and she is based in Cebu City. She earned her Juris Doctor degree in 2020. Apart from handling civil and criminal cases in the Philippines, Christine serves as a paralegal for reputable US law firms. She previously served as an elected public official in the Philippines, as the Sangguniang Kabataan Chairperson of Barangay Talamban, Cebu City from 2018 to 2023.
