Lee's Famous Recipe® Franchise Review (2026): Costs, Fees, Revenue Potential

• Category: Food & Beverage
• Initial Investment: $1,340,600 to $2,353,900
• Franchise Fee: $5,000 disclosed as the primary figure, though the disclosure also references alternate franchise fee figures of $17,500 and $35,000
• Royalty: 5% of Gross Sales
• Marketing / Ad Fee: 3% brand cooperative advertising fund fee
• Key additional recurring fees: Up to 1% local advertising expenditure; regional advertising cooperative fee up to 2% of Gross Sales if applicable; $100 monthly technology fee
• Number of locations: 126 total U.S. locations at year-end 2024; 33 company-owned and 93 franchised/licensed
• Best Fit: Owner-operator or operator-led ownership with a designated operating principal

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The estimated initial investment ranges from $1,340,600 to $2,353,900, which places this in a very high-cost startup range. The midpoint is about $1.85 million.

Major cost drivers appear to be the full restaurant buildout and equipment needs implied by the model, along with working capital. The disclosure also lists additional funds of $15,000 to $50,000 and an initial training fee of $5,000 for up to four attendees, plus $3,000 for each additional attendee.

One point to note is that the disclosure contains multiple franchise fee figures. It identifies $5,000 as the primary initial franchise fee, but alternate figures of $17,500 and $35,000 also appear. The disclosure does not clearly establish from the provided information when each fee applies, so buyers would need to confirm the exact fee structure for their specific deal.

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• Royalty: 5% of Gross Sales, payable weekly
• Brand Cooperative Advertising Fund Fee: 3% of Gross Sales
• Local Advertising Expenditures: Up to 1% of weekly Gross Sales
• Regional Advertising Cooperative Fee: Up to 2% of Gross Sales, if applicable
• Technology Fee: Currently $100 per month
• Proprietary Software License Fee: Currently $0, if required
• PCI Compliance Program Fee: Currently $0, if implemented

Other possible fees include training, opening assistance, supplier approval, inspection, audit, transfer, relocation, and conference-related charges.

Overall, the base recurring burden is not unusually heavy on the core royalty plus brand fund alone, but the total advertising-related load can rise meaningfully if local and regional requirements apply at the same time.

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Yes, the disclosure includes an Item 19 financial performance representation. It presents a 2024 sales-to-cost analysis for 16 affiliate-owned locations that had been open and operated by the affiliate for at least 18 months as of December 31, 2024.

Item 19 disclosed figures

Average unit figures:

• Gross Sales: $2,172,042
• COGS: $802,899
• Gross Profit: $1,369,144
• Labor: $573,789
• Bank & Transaction Fees: $51,462
• Misc Variable: $65,747
• Marketing: $65,161
• Total Variable Expenses: $756,160
• Total Fixed Expenses: $91,205
• Royalty: $108,602
• 4-Wall EBITDAR: $413,177

Median unit figures:

• Gross Sales: $1,985,155
• COGS: $717,860
• Gross Profit: $1,255,268
• Labor: $549,303
• Bank & Transaction Fees: $46,113
• Misc Variable: $60,337
• Marketing: $59,555
• Total Variable Expenses: $715,308
• Total Fixed Expenses: $84,352
• Royalty: $99,258
• 4-Wall EBITDAR: $356,351

Margins disclosed:

• Average 4-Wall EBITDAR: 19.0% of Gross Sales
• Median 4-Wall EBITDAR: 18.0% of Gross Sales

The disclosure does not provide a revenue range, quartiles, or unit-by-unit high/low figures in the provided information. It also states that 5 of the 16 affiliate-owned locations attained or surpassed the disclosed 4-Wall EBITDAR, which implies most units were below that figure.

Interpretation: the average and median are reasonably close, which suggests the sample is not being driven by a single extreme outlier. Still, the absence of range and quartile data limits visibility into downside and upside dispersion.

Important caveats:

• Revenue is not profit. Gross Sales and even 4-Wall EBITDAR are not the same as net income to the franchisee.
• 4-Wall EBITDAR excludes some costs that may matter to an owner, such as debt service, taxes, depreciation, amortization, and potentially owner-specific overhead.
• The sample is limited to 16 affiliate-owned locations.
• The disclosure says 18 affiliate-owned locations were excluded, largely because they had been operated by the affiliate for less than 18 months.
• The Item 19 data is based on affiliate-owned locations, not franchised units.
• The disclosure also indicates a cross-border element in the broader system context, and the provided scope notes do not clearly establish a purely U.S. franchised-unit performance set.
• The provided information does not clearly state whether the Item 19 figures are audited.

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• Model: B2C restaurant business
• Revenue pattern: Primarily recurring sales from ongoing restaurant operations
• Operating characteristics: Physical restaurant location, food cost management, labor-intensive operations, weekly royalty payments, ongoing advertising contributions, and equipment/buildout requirements consistent with a full restaurant format

This appears to be an operations-heavy model where unit economics depend on maintaining sales volume while controlling labor, food costs, and other store-level expenses.

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Advantages

• Item 19 includes both revenue and expense detail, not just top-line sales.
• The system had 126 U.S. locations at year-end 2024, indicating an established operating base.
• Average and median disclosed sales are both near $2.0 million or above in the Item 19 sample.
• Core royalty and brand fund fees are clearly stated at 5% and 3% of Gross Sales.

Considerations

• The initial investment of $1.34 million to $2.35 million is substantial.
• Item 19 is based on only 16 affiliate-owned units, with 18 additional affiliate-owned units excluded.
• The disclosure does not provide range or quartile revenue data, limiting assessment of performance variability.
• Total advertising-related obligations can exceed the base 3% fund contribution if local and regional requirements apply.
• The disclosure indicates the territory is non-exclusive.

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This franchise may fit someone prepared for a high-cost, restaurant-based operating model and comfortable overseeing day-to-day execution through direct involvement or a designated operating principal.

It likely does not fit buyers seeking a low-cost entry point, a passive ownership structure, or a business with clearly disclosed franchised-unit profit results.

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• Outlet mix is shifting: franchised/licensed outlets declined from 106 to 93 in 2024, while company-owned outlets increased from 17 to 33.
• The franchise term is 15 years, which creates a long commitment period.
• Certain defaults listed in the disclosure include serious non-curable events such as insolvency, bankruptcy, assignment for the benefit of creditors, and felony conviction.
• Some fees and obligations are triggered by specific events, including audits, inspections, transfers, relocations, and supplier approvals.
• The disclosure references multiple fee variants in places, and it does not clearly establish from the provided information how all alternate fee scenarios apply.

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Lee's Famous Recipe® presents a high-investment restaurant model with meaningful disclosed store-level sales and expense data, but the economics shown come from a relatively small affiliate-owned sample rather than franchised units. The main tradeoff is straightforward: you get a more detailed view of store-level revenue and operating expense structure, but you are taking on a capital-intensive, labor-heavy business with non-exclusive territory and limited evidence on franchisee-level net profitability.

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