How to Finance a Dan’s Bagels Franchise: Sourdough Shop Costs
By Chris Cornella
A Dan’s Bagels franchise loan pays to open or buy a scratch bakery that sells sourdough bagels, house-made cream cheeses and bagel sandwiches. The brand began in North Texas and now grows through both company-owned and franchised shops. Because the franchisor does not publish its fees or investment range online, the Franchise Disclosure Document (FDD) is where every number in your loan request has to start.
US Professional Funding is not affiliated with, sponsored by or endorsed by Dan’s Bagels; the name is used only to describe the business. Figures from the franchisor’s disclosure document can change, loan programs and terms vary, and every loan is subject to approval. Nothing here is legal, tax or investment advice, so review the current FDD and franchise agreement with a qualified franchise attorney and accountant.
Dan’s Bagels Franchise Loan at a Glance
- Concept: a sourdough bagel bakery and cafe that makes its bagels and spreads in-house and serves breakfast and lunch sandwiches.
- Ownership model: the brand operates its own shops and also has franchise owners running locations in North Texas.
- Fees and investment: not published on a franchise website; Items 5, 6 and 7 of the FDD list the franchise fee, ongoing fees and the estimated initial investment.
- Owner requirements: not published; ask the franchisor for its liquidity, net worth and experience guidelines.
- SBA Franchise Directory: listed under code S8970, with a note about the Conditional Assignment of Lease and Consent and Agreement of Landlord when real estate secures the loan.
What Is Dan’s Bagels?
Dan’s Bagels was started by Dan and Jen Hilbert, a husband-and-wife team who left corporate jobs to bake the kind of bagels they had loved while living in New York. They began by selling sourdough bagels from home before opening a storefront in Trophy Club, Texas.
The menu centers on sourdough bagels made through a multi-day process, in flavors such as everything, jalapeno cheddar and cinnamon raisin, plus rotating seasonal specials. Shops also sell house-made cream cheeses, lox and bagel sandwiches such as a pastrami reuben and a BLT.
The brand has added locations around Fort Worth and its suburbs, with some shops run by the company and others by franchise owners. For a lender, that mix matters: a young system with a small footprint has less operating history to lean on, so the buyer’s own experience, cash and projections carry more weight than they would with a large national brand.
Dan’s Bagels Franchise Costs
The franchisor does not post its costs online, so request the current FDD early. Item 7 is the budget your lender will compare to your loan request, and Item 5 shows what you pay at signing.
Initial franchise fee. Item 5 states the fee and whether any reduction applies for additional shops. Franchise fees are usually paid at signing, often from the buyer’s own cash, though they can be part of an SBA-financed project.
Lease and build-out. A from-scratch bagel bakery needs more back-of-house than a typical cafe: a production area for mixing, shaping, proofing, boiling and baking, plus a front counter and seating. Plumbing, drains, ventilation and electrical or gas service for the oven and kettle often drive the build-out budget. Our article on restaurant build-out financing explains how lenders fund leasehold improvements.
Equipment. Expect dough mixers, proofing racks or a retarder, a kettle for boiling, a deck or rack oven, walk-in and reach-in refrigeration, slicers, sandwich and prep stations, a coffee setup, point-of-sale hardware and smallwares.
Opening costs and working capital. Opening inventory of flour, cream cheese and proteins, training expenses, grand opening marketing, deposits, licenses and insurance, plus cash to carry payroll and rent while the shop builds a morning following.
Total investment. Use the Item 7 total for the shop size you are planning. When you receive the FDD, confirm the ranges for each of these categories:
- Initial franchise fee
- Rent, security deposit and utility deposits
- Leasehold improvements, architect and permits
- Mixers, kettle, ovens and refrigeration
- Coffee equipment, point of sale and technology
- Furniture, fixtures and signage
- Opening inventory and packaging
- Training travel and expenses
- Grand opening marketing
- Licenses, permits and insurance
- Additional funds for the initial operating period
Ongoing Fees and How They Affect Your Loan
Royalty and marketing contributions. Item 6 lists the royalty, any brand or marketing fund, technology fees and transfer and renewal fees. These come off the top before rent, labor, ingredients and debt service, so they belong in every month of your projections.
Morning-heavy sales. A bagel shop typically does most of its business in the breakfast and lunch hours, with weekend rushes. That makes labor scheduling and early-morning production central to the cash flow a lender reviews.
How lenders factor these costs in. A lender sizes a Dan’s Bagels franchise loan from projected sales down to cash flow available for debt service after royalties, marketing, rent and payroll. Higher fixed costs or a slow ramp-up point to a smaller loan or a larger cash reserve.
Franchisor Requirements for New Owners
Dan’s Bagels does not publish minimum liquidity or net worth figures, so ask for them during the discovery process. Expect the franchisor to look at:
- Liquid cash available for the down payment and opening reserve
- Net worth and overall financial strength
- Food service, bakery or management experience, or a plan to hire an experienced manager
- Willingness to complete the brand’s training on its bagel-making process
- Site and lease approval before construction begins
Franchisor approval and loan approval run on separate tracks, so start the Dan’s Bagels franchise loan conversation while you are still in discovery. That way the budget, the site and the financing come together at the same time.
Ways to Own a Dan’s Bagels
A new shop. Most buyers open a new location, financed with a start-up loan that covers build-out, equipment and opening costs. See our franchise start-up financing options.
Buying an existing shop. If a franchised location comes up for sale, a buyer can finance the purchase based on the shop’s actual sales and tax returns, subject to the franchisor’s transfer approval. Read our article on buying a franchise resale.
More than one shop. Ask whether the franchisor offers development rights for several shops in a defined area. Financing is usually arranged one shop at a time.
Financing Options for a Dan’s Bagels Franchise
SBA 7(a) loans. Because the brand is on the SBA Franchise Directory, an SBA 7(a) loan can fund build-out, equipment, the franchise fee, opening inventory and working capital, or the purchase of an existing shop, subject to approval.
SBA 504 loans. The 504 program fits owner-occupied real estate and long-lived equipment. Most bagel shops lease space, so a 504 loan generally applies only when the buyer purchases the building.
Conventional term loans. Buyers with strong liquidity and food service history may prefer a conventional business loan, which avoids SBA program requirements but is usually underwritten more tightly.
Equipment financing. Mixers, the kettle, ovens, refrigeration and coffee equipment can be financed separately to preserve cash. Learn more about restaurant equipment financing and leasing.
Working capital and lines of credit. A new shop needs cash for training payroll, inventory and local marketing before sales settle. See our restaurant working capital options.
Seller financing on resales. On the purchase of an existing shop, a seller may carry part of the price. A seller note is typically subordinate to the senior loan, and SBA rules may limit how it counts toward the buyer’s equity.
SBA Loans for Dan’s Bagels Franchisees
The SBA Franchise Directory lists brands whose franchise documents have been reviewed for SBA eligibility. SBA lenders generally rely on the listing before making an SBA-guaranteed loan to a franchisee, though it does not approve any individual borrower.
The brand’s listing. Dan’s Bagels appears on the directory under code S8970. The listing carries a note: when the real estate where the franchise business is located will secure the SBA-guaranteed loan, the Conditional Assignment of Lease and Consent and Agreement of Landlord may not be executed. In plain terms, that document gives the franchisor rights to take over a leased site. If you own the building and pledge it as collateral, there is no landlord lease to assign, and the document should not be signed so it cannot compete with the lender’s lien. For the usual leased shop, the note does not come into play.
Application tips. Gather the FDD, franchise agreement, lease or letter of intent, contractor bids, equipment quotes, a business plan with monthly projections, personal financial statements and tax returns. The SBA 7(a) program maximum is currently $5 million, though program rules can change. Our article on a franchise business plan for an SBA loan explains what to include.
How Lenders Evaluate a Dan’s Bagels Deal
Personal credit and financial history. Lenders review credit reports, tax returns and a personal financial statement, and significant owners generally sign personal guarantees.
Net worth and liquidity. Lenders want to see the cash injection and a reserve left after closing. With a young brand, extra liquidity can offset limited system history.
Industry and management experience. Bagel production starts before dawn and depends on consistent technique. Bakery, restaurant or multi-shift management experience, or a capable general manager, strengthens the file.
Business plan and projections. Base projections on morning traffic near the site, average ticket, catering and dozen orders, labor for early production, ingredient costs and a realistic ramp-up period.
The FDD and franchise agreement. Lenders check fees, the term and renewal and transfer rights in Item 17, any franchisor financing in Item 10 and whether Item 19 includes financial performance representations.
Site and lease. Lease term, renewal options, parking, morning access and landlord allowances matter. A lease that ends before the loan does can shorten the term a lender will offer.
Bakery Production Equipment
A sourdough bagel program depends on its production line. Mixers, proofing or retarding space, the kettle and the oven set how many dozens a shop can bake each morning, and they are identifiable assets an equipment lender can value. Get quotes from the franchisor’s approved vendors early, then decide whether to fold equipment into the main loan or finance it separately.
Multi-Unit Growth and Development Agreements
If the franchisor offers multi-shop rights, ask how the development schedule works and what happens if an opening slips. Lenders usually finance the first shop on its own and look at its results before funding the next. Our article on multi-unit franchise financing explains how lenders view a growing operator, and our look at financing an emerging franchise brand covers what changes when a system is young.
Real-World Scenarios
A first-time owner with a bakery manager. A corporate professional signs for one shop, hires a manager with bakery experience and uses an SBA 7(a) loan for build-out and equipment, keeping a reserve for the first months.
A restaurant operator adding a breakfast concept. An owner of lunch and dinner restaurants adds a bagel shop to cover the morning daypart and uses a conventional loan supported by existing cash flow.
A buyer purchasing an existing shop. A buyer acquires a franchised location with tax returns and sales history, finances the purchase with an SBA 7(a) loan and negotiates a small seller note.
Common Mistakes to Avoid
- Signing a lease before the franchisor approves the site and before you have contractor bids
- Underestimating plumbing, ventilation and utility work for the production area
- Building projections from a weekend rush and applying them to every day
- Assuming fees from memory instead of reading Items 5, 6 and 7
- Leaving too little working capital for the ramp-up period
Read more about restaurant loan mistakes that slow down approvals.
Next Steps to Finance Your Dan’s Bagels Franchise
Step 1: Request the FDD. Contact the franchisor, complete its inquiry process and ask for the current disclosure document.
Step 2: Review it with advisors. Go through Items 5, 6, 7, 10, 17 and 19 and the franchise agreement with a franchise attorney and accountant.
Step 3: Build your budget. Combine the Item 7 ranges with contractor bids, equipment quotes and a working capital reserve.
Step 4: Talk with a financing specialist. Compare SBA 7(a), conventional and equipment options. Our SBA loan calculator gives early payment estimates for planning only.
Step 5: Secure the site. Negotiate the lease with franchisor approval and line up contractors.
Step 6: Apply and close. Submit the loan package, schedule training and coordinate equipment delivery.
Dan’s Bagels Franchise Loan FAQs
How much does a Dan’s Bagels franchise cost?
The franchisor does not publish its investment range online. Item 7 of the current FDD gives the estimated initial investment, including the franchise fee, build-out, equipment and opening costs.
What is the Dan’s Bagels franchise fee?
Item 5 of the FDD states the fee and any discount for additional shops. Ask for the current document rather than relying on older figures.
What royalty does Dan’s Bagels charge?
Item 6 lists the royalty, any marketing fund contribution and other recurring fees. Build all of them into your monthly projections.
How much liquid capital and net worth do I need?
The franchisor does not publish minimums online. Ask during discovery, and expect a lender to want enough cash for the down payment plus a reserve.
Is Dan’s Bagels on the SBA Franchise Directory?
Yes. It is listed under code S8970, with a note that the Conditional Assignment of Lease and Consent and Agreement of Landlord may not be signed when real estate secures the SBA-guaranteed loan.
Can I get an SBA loan for a Dan’s Bagels franchise?
The listing lets SBA lenders consider the brand, but each borrower must still qualify on credit, liquidity, experience and cash flow.
Do I need bakery experience?
Ask the franchisor about its requirements. Lenders will want to know who runs early-morning production, so food service or management experience helps.
Can I buy an existing Dan’s Bagels shop?
Yes, if a franchised shop is for sale. The loan is based on the shop’s financial history, subject to franchisor transfer approval.
Can I finance the equipment separately?
Often, yes. Equipment financing can cover mixers, ovens, the kettle and refrigeration, subject to approval.
Does the franchisor offer financing?
Item 10 of the FDD discloses any financing offered by the franchisor or its affiliates.
How long is the franchise term?
Item 17 of the FDD and the franchise agreement set the term, renewal conditions and transfer rules. Lenders generally prefer a term at least as long as the loan.
Final Thoughts
A Dan’s Bagels franchise loan funds a production-heavy bakery cafe in a young, growing system. Buyers who get the FDD early, budget carefully for the production area and keep a healthy cash reserve will present the strongest case to a lender.
US Professional Funding helps franchise owners and buyers finance start-ups, acquisitions, equipment, working capital and refinancing. Learn more about our franchise financing programs and our restaurant and food service financing solutions.
