How to Finance a Chicken Shack Franchise: Fees and Build-Out
By Marc Cornella
A Chicken Shack franchise loan funds a carryout-and-delivery chicken restaurant from a Michigan brand that has been frying chicken since 1956. The franchisor publishes clear financial thresholds and a build-out cost range, which gives buyers and their lenders a solid starting point for planning.
This article covers what Detroit’s Original Chicken Shack asks of new owners, how its fees affect cash flow, what its SBA Franchise Directory listing means, and how buyers typically structure financing for a new restaurant or an existing one.
US Professional Funding is not affiliated with, sponsored by or endorsed by Chicken Shack; the name is used only to describe the business. Figures from the franchisor’s website and disclosure document can change, loan programs and terms vary by lender and borrower, and every loan is subject to approval. Nothing here is legal, tax or investment advice; review the current Franchise Disclosure Document (FDD) and franchise agreement with a franchise attorney and an accountant before you sign.
Chicken Shack Franchise Loan at a Glance
- Concept: fast casual fried chicken built around carryout and delivery, with chicken delivered fresh daily.
- Heritage: founded in Royal Oak, Michigan, in 1956.
- Initial franchise fee: $30,000, according to the franchisor’s website.
- Royalty: 5%.
- Marketing fund: 2%.
- Build-out costs: $397,500 to $770,000, as stated by the franchisor.
- Restaurant size: 1,750 to 2,500 square feet.
- Financial requirements: $200,000 in liquid capital and $500,000 in net worth, on an individual or partnership basis.
- Training: a four-week program, with certification required no later than four weeks before opening.
- SBA Franchise Directory: listed as “Chicken Shack / Detroit’s Original Chicken Shack” under code S3805, with no special note.
What Is Chicken Shack?
John and Iola Sobeck opened the first Chicken Shack in Royal Oak, Michigan, on June 6, 1956, using their own process for preparing and cooking chicken. The family business is now four generations strong, and the brand markets itself as Detroit’s Original Chicken Shack, with more than 70 years in operation.
The menu. Fried chicken dinners and family packs anchor a menu that also includes sandwiches, tenders, wings, ribs and fish, a mix that suits takeout and delivery.
The format. The franchisor describes the restaurants as fast casual, with carryout and delivery at the center of the business since the 1950s. Units run 1,750 to 2,500 square feet, so they fit inline or end-cap retail space, freestanding buildings or conversions of former restaurants.
How lenders see the brand. A long operating history, a published capital requirement and an SBA Franchise Directory listing give lenders a clear framework. Underwriters will still focus on the site, the owner’s experience and realistic sales assumptions outside the brand’s Michigan home base. Note that other, unrelated restaurants use similar names, so confirm you are reviewing the correct franchisor’s FDD.
Chicken Shack Franchise Costs
The franchisor’s website gives the headline numbers; the current FDD sets out the full detail in Items 5, 6 and 7. A lender will expect your budget to reconcile with the Item 7 table.
Initial franchise fee. The franchisor lists a $30,000 initial franchise fee. Item 5 explains when it is due and whether any reduced fee applies to additional units.
Build-out. The franchisor states build-out costs of $397,500 to $770,000. That range is the largest piece of the budget and depends on whether the space is a vanilla shell, a second-generation restaurant or a new build, and on any landlord contribution. Our article on restaurant build-out financing explains how lenders handle construction draws.
Equipment. Commercial fryers, hoods, walk-in cooler and freezer, holding cabinets, prep tables, point-of-sale and online-ordering hardware, menu boards and signage. Item 8 identifies required suppliers and specifications.
Opening costs and working capital. Opening inventory, training travel, deposits, insurance, grand opening marketing and cash to carry payroll and rent while sales build.
Total investment. The franchisor’s website does not state a total investment range, so use Item 7 of the current FDD. Expect these line items:
- Initial franchise fee
- Real estate deposits and rent during construction
- Leasehold improvements and build-out
- Kitchen equipment, ventilation and fire suppression
- Furniture, fixtures, signage and menu boards
- Point-of-sale and technology systems
- Opening inventory and supplies
- Training expenses
- Grand opening marketing
- Insurance, licenses and permits
- Additional funds for the initial operating period
Because the build-out figure alone reaches as high as $770,000, the all-in budget for a full new build will be higher once the fee, opening costs and working capital are added. Size the loan request to the complete Item 7 picture, not just construction.
Ongoing Fees and How They Affect Your Loan
Royalty. The franchisor lists a 5% royalty, which comes off the top of sales before rent, food, labor and debt service.
Marketing fund. Franchisees contribute 2% to a marketing fund. Item 6 explains whether local advertising spending is required in addition.
Other fees and remodels. Item 6 lists technology, training, transfer and renewal fees, and the franchise agreement describes required upgrades over time. Model every recurring charge and plan for future reinvestment.
How lenders factor these costs in. Underwriters subtract royalty, marketing, rent, food and labor, then compare what remains to annual debt service. Stress-test chicken costs and include delivery commissions.
Franchisor Requirements for New Owners
- Liquid capital: $200,000.
- Net worth: $500,000.
- Basis: the franchisor says these requirements apply on an individual or partnership basis, so qualified partners can combine.
- Training: a four-week program, with certification no later than four weeks before opening.
The approval process. The franchisor describes six steps: discovery (an overview at headquarters or by webinar, a one-on-one meeting with the president and receipt of the FDD); real estate site selection with its real estate team, including the letter of intent and lease review; construction with the company’s architect and your general contractor; training; grand opening; and ongoing support from franchise consultants. Approved candidates are offered a franchise after discovery.
Lenders treat the liquidity requirement as a floor. The cash you bring to closing still has to leave reserves for the build and opening period.
Ways to Own a Chicken Shack
Opening a new restaurant. Most new owners will build a new unit. Lenders underwrite projections, the lease and the build-out budget, so financing depends heavily on the site and your experience. Our page on franchise start-up financing outlines the process.
Buying an existing restaurant. When a franchisee sells, the buyer can review real sales, food cost and labor history. Lenders underwrite actual cash flow, and the franchisor must approve the transfer. See our guide to buying a franchise resale.
Taking over a former restaurant. A second-generation space with an existing hood and grease interceptor can reduce build-out costs, after a contractor inspects it.
Financing Options for a Chicken Shack Franchise
SBA 7(a) loans. The most familiar Chicken Shack franchise loan structure is SBA-backed. Because the brand is on the SBA Franchise Directory, an SBA 7(a) loan can finance the franchise fee, build-out, equipment, opening costs and working capital in one loan, or the purchase price of an existing restaurant.
SBA 504 loans. If you buy or build the restaurant building, an SBA 504 loan is designed for owner-occupied real estate and long-lived equipment.
Conventional term loans. Owners with strong liquidity, collateral or existing restaurants may use a conventional business loan instead of an SBA program.
Equipment financing. Fryers, hoods, walk-ins, holding cabinets and point-of-sale systems can be financed separately, which can preserve cash for the build-out. Learn more about restaurant equipment financing and leasing.
Working capital and lines of credit. Pre-opening payroll during training, opening inventory and early marketing all need cash before sales arrive. A working capital reserve or line of credit also absorbs swings in chicken prices. See our restaurant working capital options.
Seller financing on resales. A seller may carry part of the price on an existing unit. A seller note is typically subordinate to the senior loan, and SBA rules can limit how it is structured.
SBA Loans for Chicken Shack Franchisees
SBA lenders generally require a franchise brand to appear on the SBA Franchise Directory before making an SBA-guaranteed loan to one of its franchisees. The directory shows that the SBA has reviewed the franchise relationship for eligibility; it does not approve any borrower or vouch for the brand.
Chicken Shack’s listing. Chicken Shack appears as “Chicken Shack / Detroit’s Original Chicken Shack” under code S3805 with no special note. In plain terms, the franchise agreement has been accepted for SBA purposes, and a lender can move straight to underwriting you and your restaurant. Confirm the listing is still current when you apply.
Loan size. The SBA 7(a) program maximum is currently $5 million, though program rules can change.
Application tips. Bring the current FDD, a signed or draft lease, the contractor’s bid, an equipment list and a business plan. Our SBA loan calculator can help with early payment estimates; results are for planning only and are not an offer or approval.
How Lenders Evaluate a Chicken Shack Deal
Personal credit and financial history. Every Chicken Shack franchise loan starts with a review of credit reports, tax returns and a personal financial statement, plus a personal guarantee.
Net worth and liquidity. The franchisor’s $200,000 liquidity and $500,000 net worth thresholds are the starting point. Lenders also want to see cash left after your equity injection.
Industry and management experience. Restaurant management, multi-unit food service or general business management experience strengthens a request, especially for a first unit.
Business plan and projections. Build sales assumptions around carryout and delivery, the app and loyalty program, family meal bundles and local trade area demographics. Account for delivery commissions, a ramp-up period and food cost swings.
The FDD and franchise agreement. Lenders review Items 5, 6, 7, 8, 17 and 21, plus the term, renewal and transfer conditions. Our article on how lenders read a Franchise Disclosure Document explains what matters. The franchisor’s website references financial performance information from its FDD, so review Item 19 for exactly what is disclosed.
Site and lease. Visibility, parking, driver access and a lease term that matches the loan all matter.
Historical financials for resales. Several years of profit and loss statements, sales reports and tax returns for the unit being purchased.
Kitchen and Equipment Considerations
A chicken kitchen is equipment-heavy. Fryers and hoods drive both the build-out and the maintenance budget, and ventilation and fire suppression must meet local code. Grease handling, walk-in refrigeration and holding equipment for family-meal peaks belong in the plan. Buyers of existing restaurants should check the age and condition of fryers, hoods and refrigeration and budget for replacements.
Multi-Unit Growth and Development
Once the first restaurant has a track record, lenders can underwrite its cash flow alongside a new unit. Each additional restaurant needs franchisor approval and its own site, lease and build-out budget. Ask whether the franchisor offers development agreements or reduced fees for additional units, and read the schedule and default terms in the FDD. Our article on multi-unit franchise financing covers how lenders approach growth.
Real-World Scenarios
A restaurant manager opening a first unit. A buyer with years of restaurant management experience meets the liquidity and net worth requirements, signs a lease on a second-generation space and uses an SBA 7(a) loan for the fee, build-out, equipment and working capital.
A partnership combining resources. Two partners meet the requirements together on a partnership basis, and the lender requires guarantees from each.
A buyer purchasing an existing restaurant. A buyer acquires a unit from a retiring owner. The lender underwrites historical cash flow, budgets for fryer replacement and approves a modest seller note on standby.
Common Mistakes to Avoid
- Treating the build-out range as the total investment
- Using every dollar of liquid capital on the down payment and leaving no reserves
- Underestimating ventilation, fire suppression and grease system costs
- Ignoring delivery commissions in projections
- Signing a lease before the lender reviews it
- Skipping a franchise attorney’s review of the FDD
- Confusing this franchisor with unrelated restaurants that use similar names
For more pitfalls, read the restaurant loan mistakes that cost owners the most.
Next Steps to Finance Your Chicken Shack Franchise
Step 1: Confirm you meet the requirements. Verify that you or your partnership have the required liquid capital and net worth.
Step 2: Complete discovery and review the FDD. Attend the overview, meet the leadership team and review the FDD with a franchise attorney and accountant.
Step 3: Talk with a financing specialist early. Learn what loan size and structure fit your finances before you commit to a site.
Step 4: Secure a site. Work with the franchisor’s real estate team on the letter of intent and lease, and share the lease with your lender before signing.
Step 5: Build the budget and plan. Get contractor bids and equipment quotes and assemble projections that tie to Item 7.
Step 6: Apply and close. Submit your application, coordinate the closing with construction and keep working capital in reserve for training and opening.
Chicken Shack Franchise Loan FAQs
How much does a Chicken Shack franchise cost?
The franchisor lists build-out costs of $397,500 to $770,000 plus a $30,000 initial franchise fee. The total investment, including equipment, opening costs and working capital, is in Item 7 of the current FDD.
What is the Chicken Shack franchise fee?
The franchisor’s website lists a $30,000 initial franchise fee.
What royalty does Chicken Shack charge?
A 5% royalty plus a 2% contribution to a marketing fund, according to the franchisor.
How much liquid capital do I need?
The franchisor asks for $200,000 in liquid capital and $500,000 in net worth, on an individual or partnership basis.
Is Chicken Shack eligible for SBA loans?
Yes. It is listed on the SBA Franchise Directory as “Chicken Shack / Detroit’s Original Chicken Shack” under code S3805. Each borrower still has to qualify.
Can I buy an existing Chicken Shack?
Yes, if a franchisee is selling and the franchisor approves the transfer. Lenders underwrite the restaurant’s actual financial history.
Can a first-time restaurant owner get a Chicken Shack franchise loan?
It is possible. Lenders look for management experience, the franchisor’s four-week training, adequate liquidity and a strong site.
Does Chicken Shack offer financing?
Check Item 10 of the current FDD, which discloses any financing the franchisor offers. Most buyers arrange their own financing.
How long is the franchise term?
The term and renewal rights are set out in Item 17 of the current FDD. Lenders generally want the remaining term and lease to cover the loan.
Final Thoughts
Chicken Shack combines a long Michigan history with a carryout and delivery model and clearly published capital requirements. A well-prepared Chicken Shack franchise loan request starts with a budget that goes beyond the build-out range. Keep reserves after your down payment, and approach lenders with a site, a lease and a plan.
US Professional Funding helps franchise owners and buyers finance start-ups, acquisitions, equipment and working capital. Learn more about our franchise financing and restaurant financing solutions.
