Risk Score
Pending analysis
Investment Range
$99,900 - $1,006,000
Franchise Fee
$30,000
Min Cash Required
$10,000
Total US Locations
369
Business Summary
Sbarro operates and franchises Italian-style restaurants that feature Italian foods and related items. These restaurants are typically located in various settings such as in-line shopping centers, food courts, convenience stores, truck stops, casinos, hospitals, and college campuses. Sbarro offers a diverse menu including pizza, pasta, hot and cold Italian entrees, salads, sandwiches, desserts, and beverages. On occasion, Sbarro also offers existing company-owned restaurants for sale as Conversion Restaurants to franchisees.
Corporate History
Sbarro's roots trace back to 1956 when the Sbarro family opened their first Salumeria, an Italian grocery store, in Brooklyn. In 1967, Sbarro opened its first modern Sbarro Restaurant, which is similar to the type of business offered today. Sbarro Franchise Co., LLC, the current franchisor, was established in Delaware on May 21, 2014. It began offering and selling franchises for new restaurants in June 2014 and for Conversion Restaurants in January 2016. The predecessor, Sbarro LLC, operated Italian-style restaurants and offered franchises from November 2011 to May 2014, when it assigned its franchise agreements to Sbarro Franchise Co., LLC. Sbarro, Inc., another predecessor, operated and franchised Italian-style restaurants from November 1977 to November 2011, also selling franchises for non-traditional locations starting in 1991.
Financial Overview
Investment Range
$99,900 - $1,006,000
Franchise Fee (Low)
$30,000
Franchise Fee (High)
$35,000
Minimum Cash Required
$10,000
Royalty %
5%
Marketing %
1%
Equipment Costs (Low)
$100,000
Equipment Costs (High)
$675,000
Working Capital
$12,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
Sbarro Holdings, Inc. and Subsidiaries received an unqualified audit opinion for its consolidated financial statements for the years ended December 31, 2023, and January 1, 2023. This indicates that the financial statements present fairly, in all material respects, the company's consolidated financial position and results of operations. As of December 31, 2023, Sbarro reported a net loss attributable to Sbarro Holdings, Inc. and Subsidiaries of approximately $1.42 million, compared to a net loss of $1.86 million for the prior year. The company's total stockholders' equity, including noncontrolling interests, was approximately $5.7 million at the end of 2023. Sbarro has long-term debt of approximately $19.76 million, with a term loan reduced to $22.5 million and extended to March 8, 2026. The company was compliant with its financial covenants as of December 31, 2023, including maintaining required franchise-related income and liquidity. Sbarro's management's estimates for legal reserves related to ongoing litigation are based on reasonable outcomes and do not expect a material effect on its financial position.
Financing Details
Sbarro does not offer direct or indirect financing, nor does it guarantee a franchisee's note, lease, or obligation. However, for Conversion Restaurants, Sbarro LLC or an affiliate will sublease the premises to the franchisee. The Sublease Agreement aligns with the term of the existing lease and the Franchise Agreement, with renewal being contingent on the franchisee negotiating their own lease with the landlord upon expiration of the current sublease term. Sbarro reserves the right to charge additional rent of up to 1% of annual sales for serving as the sublandlord. Franchisees may also need to reimburse Sbarro LLC or an affiliate for a lease security deposit, estimated between $0 and $10,000, which is refundable if the franchisee is not in default. Sbarro does not receive payments for obtaining or placing financing and does not intend to sell or assign rights in any Sublease.
Performance Metrics
Total US Locations
369
Franchised Units
222
Corporate Units
147
Avg Square Footage
1,600
Franchising Since
2014
Legal & Compliance Analysis
Recent Litigation
No
Bankruptcy
No
Litigation Summary
Sbarro has a clean legal record with no litigation or bankruptcy proceedings required to be disclosed in Item 3 or Item 4 of its Franchise Disclosure Document. This means Sbarro has not been involved in any material litigation or bankruptcy events that would typically be reported to prospective franchisees.
Bankruptcy History
Sbarro has no bankruptcy history to disclose in Item 4 of its Franchise Disclosure Document. Sbarro states that no bankruptcy is required to be disclosed in this Item.
Agreement Terms
Initial Term
10 years
Renewal Term
5 years
Renewal Conditions
To renew the franchise agreement, Sbarro franchisees must provide written notice of their intent to renew between 6 and 12 months before the current term expires. At the time of renewal, their restaurant operations must be in substantial compliance with Sbarro's standards and manuals, and neither the franchisee nor any of their affiliates or principals should be in default of any agreements with Sbarro. Franchisees will also be required to sign Sbarro's then-current form of franchise agreement, which may have different terms, including a higher royalty fee. Additionally, they must pay a renewal fee of $7,500, agree to refurbish or renovate the restaurant to meet Sbarro's current prototype, and execute a general release in favor of Sbarro. For Conversion Restaurants, franchisees must also enter into a lease agreement with Sbarro LLC or an affiliate, or a purchase agreement for the location.
Training & Support Program
Franchisor Assistance
Sbarro provides franchisees with assistance before and after their restaurant opens. Before opening, Sbarro helps with site evaluation and selection, provides specifications for inventory, equipment, and signs, and offers a four-week training program for 2 to 4 people, including the full-time manager. During operation, Sbarro offers ongoing assistance with organizational structure, menus, food recipes, advertising, promotions, and product pricing. Sbarro also provides instructional materials, such as manuals and training tools, and advises on operating problems identified through reports or inspections. Franchisees must correct these problems promptly. While opening assistance is provided at no extra cost, travel and living expenses for training are the franchisee's responsibility. If training is canceled due to the franchisee, they must reimburse Sbarro for incurred expenses. Sbarro may also offer design, construction, and vendor-engagement services for a fee, though franchisees are not obligated to use Sbarro for these services.
Initial Training Hours
150
Training Location
Approved Sbarro Restaurant
Ongoing Support
During the operation of the restaurant, Sbarro provides franchisees with various forms of ongoing support. This includes offering operating assistance as Sbarro deems necessary, covering guidance on organizational structure, menus, food recipes and preparations, advertising and promotions, product pricing, and evaluating new food developments. Sbarro also provides additional instructional and training materials beyond the initial manuals to help improve restaurant operations. Franchisees will receive advice from Sbarro regarding operating problems identified through submitted reports or inspections, which they are required to correct. Sbarro may also require additional, ongoing training if operational standards fall below acceptable levels.
Franchise Requirements
Ideal Candidate Profile
Sbarro is seeking qualified prospects, typically national or regional entities with experience running multi-unit, multi-concept, and multi-location food service facilities, especially for non-traditional locations. The franchisee's Operating Principal, who must own at least 20% equity and voting control, is expected to dedicate full-time effort to managing the restaurant's operations. This Operating Principal must have satisfactorily completed Sbarro's training program. Sbarro also considers a franchisee's prior business experience in operating restaurants similar to Sbarro Restaurants when determining royalty fees.
Industry Experience Required
No
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
retail
Owner Participation
full-time
Territory Type
non-exclusive
Territory Size Requirements
Sbarro franchisees do not receive an exclusive territory. Sbarro retains the right to establish additional Sbarro Restaurants or other facilities that may compete with the franchisee's restaurant in any proximity, and may also use alternative distribution channels, including the internet, under any of its trademarks without compensating the franchisee. While Sbarro may, in its sole discretion, offer development agreements that include exclusive rights to open multiple new restaurants in a designated territory, there is no guaranteed minimum exclusive territory for such agreements, and the terms are negotiated on a case-by-case basis.
Staffing Notes
Sbarro requires its franchisees to designate an "Operating Principal" who will be the full-time manager of the Sbarro Restaurant. This Operating Principal must own at least 20% of the franchisee entity's equity and voting control, have the authority to make all operational decisions, and must have satisfactorily completed Sbarro's training program. The Sbarro Restaurant must always have at least one management-level employee who has completed Sbarro's Initial Training present and on duty during all operating hours. Franchisees are also responsible for implementing a training program for their general employees in accordance with Sbarro's standards and maintaining a sufficient staff of trained employees. All persons actively involved in the management of the Sbarro Restaurant or who have access to Sbarro's confidential information must sign confidentiality agreements.