Should I open or buy a Romano’s Macaroni Grill franchise in 2027?

A buyer walks into a shuttered anchor tenant

Picture the deal as it usually arrives. A broker sends you a listing: a 6,200-square-foot freestanding pad site off a suburban arterial, former Macaroni Grill, dark for fourteen months, landlord motivated. The hood system is intact. The bar is intact. The wood-fired oven — the one that gave the brand its original signature — is still bolted to the line. Asking price on the leasehold and equipment is a fraction of what a ground-up build would cost, and somebody on the seller's side mentions that the brand "is still franchising in some markets." That last sentence is the one that gets people into trouble.

Here is what is actually in front of you, unbundled. There are three separate assets, and they have wildly different values. The real estate and improvements are real: a second-generation restaurant space with a functioning grease interceptor, a Type I hood, adequate electrical service, ADA-compliant restrooms, and a liquor-licensed floor plan is worth genuine money because replicating it from a vanilla shell costs $700K to $1.8M. The equipment package is real but depreciating and probably tired — a walk-in that sat unpowered for a year needs coils and gaskets, and POS hardware from the last operator is worthless because the software is gone. The brand license is the asset you need to price near zero until proven otherwise, and it is the one the seller is charging you the most for emotionally.

That reframing is the whole exercise. The question "should I open or buy a Romano's Macaroni Grill franchise in 2027" collapses into a much more answerable one: *is this second-generation Italian full-service box, in this trade area, at this occupancy cost, a good restaurant?* If the answer is yes, you can operate it under almost any flag — your own concept, a healthier franchise brand, or a licensed Macaroni Grill — and the flag becomes a marketing decision rather than an existential one. If the answer is no, no brand fixes it. Two bankruptcies are, among other things, evidence that a strong name does not rescue weak boxes.

The adjacent version of this scenario shows up constantly in casual dining and it is worth recognizing the pattern. Buca di Beppo filed Chapter 11 in 2024. Red Lobster filed in 2024. TGI Fridays filed in 2024. Bertucci's, another full-service Italian chain, has filed more than once. When an entire cohort of large-format, mid-priced, alcohol-attached casual-dining brands hits the courthouse inside a few years, the failure is not idiosyncratic management error at each one. It is a segment-level squeeze: occupancy costs sized for 2005 traffic, labor sized for table service, menus priced under fast-casual's rising ceiling, and a guest who now considers a $22 chicken parmesan a considered purchase rather than a Tuesday default. Buying into that segment is a legitimate decision — people make money in it — but it has to be an *informed* decision, not an accident of a cheap pad site.

One more framing detail matters before the numbers. There is a difference between buying a franchise (signing a new franchise agreement with a franchisor and building or converting a unit) and buying an existing franchised unit (acquiring a going concern from a departing franchisee, subject to franchisor approval and usually a transfer fee). The second is dramatically easier to underwrite because it has a trailing P&L, real sales history, and a staff. The first is a bet on a pro forma. With a distressed brand, the first is close to ununderwritable — you have no comparable set of healthy new units to reason from — while the second at least gives you twelve to thirty-six months of actual sales to discount. If someone is offering you a *new* Macaroni Grill franchise agreement in 2027, the burden of proof they owe you is enormous.

How a distressed franchise system actually transmits risk to you

People assume franchise risk means "the brand might go away." That is the least of it, and it is usually the slowest-moving part. The real mechanism is a chain of dependencies where each link the franchisor controls becomes a link you cannot repair yourself.

Start with marketing fund scale. A franchisor collects 2–3% of gross sales into a national or regional advertising fund. With 500 units averaging $3M, that fund is $30M–$45M — enough for real media. With 40 units averaging $2M, it is $1.6M–$2.4M, which buys almost nothing at a national level and, after agency and production overhead, may buy nothing at a local one. You are still paying the same percentage. The fee stays constant while the return on it collapses. That is the single most under-modeled line in a distressed-brand pro forma: you pay a national ad rate and receive local ad results, so you have to fund your own local marketing on top of it, out of the same P&L.

Next, supply chain leverage. Franchise systems justify royalties partly through purchasing power — negotiated pricing on proteins, produce, paper, and beverage through a co-op or approved distributor program. That leverage is a function of case volume. A shrinking system loses distributor priority, loses rebate tiers, and eventually loses the distributor's interest in carrying proprietary SKUs at all. Then you get the worst outcome: you are contractually required to buy branded proprietary items, but the distributor stocks them thinly, so you face out-of-stocks on signature menu items you cannot substitute without violating the agreement. An independent operator hits a shortage and changes the special. A franchisee hits a shortage and 86s a menu item that guests came in for.

Then field support. In a healthy system a franchise business consultant visits quarterly, benchmarks your food cost against a peer set, and brings you playbooks that worked in twenty other markets. In a contracted system, that role is often eliminated, consolidated into a regional director covering four states, or staffed by someone who has never run a unit. The peer benchmarking specifically stops being useful when the peer set is fifteen units, several of which are also struggling. You are paying a royalty for operating expertise that has left the building.

Finally, the agreement's asymmetry survives the decline intact. The territorial protections, the transfer approval rights, the remodel obligations, the personal guarantee on the lease, the post-termination non-compete, and the requirement to re-image at the franchisor's schedule are all still enforceable. A remodel mandate is the classic trap: five or seven years in, the franchisor requires a $300K–$600K refresh to current image standards, and you owe it regardless of whether the brand has grown or shrunk since you signed. If the system has contracted, your remodel is buying you an updated version of a logo with less equity than the one you bought.

The practical test that falls out of this: quantify the flag. Ask what a Macaroni Grill sign on the building is worth in incremental traffic versus the same box operated as your own Italian concept. If the brand adds, say, 8% to sales in a market where it has residual awareness, and the all-in fee load is 7–10% of sales, the flag is destroying value. If it adds 25% because there is a loyal older demographic that still seeks it out, it may pay. You cannot know without checking, and the way you check is by looking at the trailing sales of nearby comparable units and at whether the brand still has any local presence at all. In a market with zero existing locations, the awareness lift is closer to zero than to twenty-five, and you are building recognition from scratch while paying for someone else's.

Real numbers you should be underwriting against

Because domestic Macaroni Grill franchising is minimal, the honest way to build a model is from full-service Italian casual-dining benchmarks generally, then apply a distressed-brand discount to the revenue line and a premium to the risk-adjusted return you demand. Do not accept a franchisor's pro forma as a starting point; build yours and see whether theirs is inside your range.

Capital, ground-up or full conversion of a vanilla shell:

Buying an existing operating unit is priced differently — typically a multiple of adjusted EBITDA rather than a sum of capital costs. Small single-unit restaurants trade in a wide band, commonly two to four times seller's discretionary earnings, with the multiple compressing when the brand is distressed, when the lease has short remaining term, and when the buyer must assume a remodel obligation. Two things to insist on: a lease with at least ten years of term including options (a five-year remaining lease on a $2M leasehold investment is a wealth transfer to the landlord), and an estoppel and a franchisor transfer consent in writing before you fund, not after.

Operating model on $2.6M in sales, which is a reasonable target for a well-located full-service Italian box and above where many struggling units land:

• Food and beverage cost: 29–33% of sales. Italian is favorable here — pasta, sauce, and bread carry excellent margin — but that advantage is offset by check averages that resist increases and by a bar mix that only helps if you actually drive it.
• Labor including management and payroll taxes: 32–38%. This is the line that has moved most since 2020 and it is the line that kills undercapitalized operators. A full-service Italian kitchen needs skilled sauté and sauce positions; those people are scarce and priced accordingly.
• Occupancy — rent, CAM, taxes, insurance: 6–10% of sales. Above 10% you are structurally impaired and no amount of operational excellence fixes it. This is the single number to underwrite hardest, because it is fixed while sales are not.
• Royalty and ad fund: 7–10% combined on a franchised unit; zero on an independent.
• Other operating expense — utilities, repairs, supplies, credit card fees, third-party delivery commission: 14–20%.
• Resulting store-level EBITDA before debt service and any corporate overhead: realistically 6–12% in a good year for a franchised unit, higher for a strong independent that keeps the royalty. On $2.6M, 8% is about $208K — before debt service on $1.5M–$3M of capital.

Run the debt math, because it is where the deal usually breaks. An SBA 7(a) loan at prevailing rates over ten years on $1.5M of the project carries annual debt service in the low-to-mid six figures. If store-level EBITDA is $208K and debt service is $220K, you are negative before you take a dollar of owner compensation. That is not a hypothetical failure mode; it is the modal one. The fix is either more equity, a cheaper box (second-generation conversion), higher sales, or a lower fee load — and the fee load is the only one a franchisor controls.

Two more benchmarks worth holding in your head. Break-even on cash flow for a new full-service unit typically takes 9 to 18 months, and a distressed brand extends that because the opening traffic bump is smaller. And average unit volume matters more than margin percentage in this segment, because so much of the cost structure is fixed: a box doing $3.2M at 9% earns more than a box doing $2.1M at 11%, and the fixed-cost leverage means the gap widens fast. When you evaluate a market, you are really forecasting AUV.

Trade-offs, and what you would do instead

Lay the options side by side rather than asking yes or no on one of them. The alternatives are not all in casual dining, and the best answer for a lot of operators is in an adjacent segment entirely.

Operate the same box as an independent Italian concept. You keep the 7–10% fee load, which on $2.6M is $180K–$260K a year — often the entire difference between a viable and a nonviable unit. You control the menu, so you can price to your market and change a dish that isn't selling in a week rather than a fiscal year. You own whatever brand equity you build, which means the business has terminal value beyond its equipment. The costs are real: no playbook, no purchasing co-op, no recipe library, no training system, and a harder time getting bank financing because lenders like franchise systems with documented failure rates. If you have run full-service before, this is usually the stronger play. If you have not, the franchise system is buying you an operating manual, and that has genuine value — just not necessarily from a system that has shrunk.

Buy into a healthier full-service brand. Carrabba's, Bonefish, Outback, and Texas Roadhouse are all majority-corporate domestically, which limits access, but the broader point holds: if you want a franchise, buy one whose unit count is flat or growing and whose Item 19 shows a real distribution of unit performance. A brand adding units has an ad fund that grows, a distributor that returns calls, and field support that exists. You will pay a higher franchise fee and face stricter approval and net-worth requirements. That is the price of buying something that works.

Drop to fast-casual Italian or pizza. Capital falls by roughly two-thirds — a 1,800 to 2,600 square foot fast-casual box with a limited kitchen and no full bar often lands in the $400K–$900K range. Labor drops from the mid-30s to the mid-20s because you eliminate table service. Off-premise works, which matters enormously: pizza and baked pasta travel well, while a plated chicken parm with a delicate sauce arrives at a guest's door as a bad review. Third-party delivery at 15–30% commission is punishing on a $22 entrée and tolerable on a $9 build-your-own bowl only because throughput is higher and the kitchen is simpler. The ceiling on AUV is lower, but the risk-adjusted return is frequently better, and you can open two or three units for the capital one full-service box consumes.

Buy an existing profitable independent and keep it. For $500K–$1.5M you can often acquire a going concern with a trailing P&L, an established guest base, a trained staff, and a landlord relationship — the four things a new build spends eighteen months and a lot of cash trying to manufacture. The catch is that owner-dependent restaurants lose the owner at closing; underwrite what happens when the chef-owner whose name is on the sign leaves. Structure a transition period and hold back part of the price against sales retention.

Go non-restaurant with the same capital. This deserves a mention because the honest comparison is often against a different industry. $1.5M–$3M deployed into a service franchise with no kitchen, no liquor license, no perishable inventory, and no dining room labor produces lower gross revenue but frequently better cash-on-cash returns and a fraction of the operational intensity. Restaurants are a lifestyle commitment as much as an investment; know which one you are buying.

Pitfalls that sink these deals, and the countermeasure for each

Treating a cheap purchase price as a margin of safety. It isn't. The purchase price is a one-time number; occupancy cost is a fifteen-year number. A $400K leasehold acquisition on a $28-per-square-foot triple-net lease in a 6,200 square foot box is $173K of annual rent plus CAM, taxes, and insurance — call it $215K all-in. At a 9% occupancy target, that box must do $2.4M in sales to be structurally sound. If the trade area supports $1.8M, you have bought a permanent problem at a discount. *Countermeasure:* compute required AUV from rent before you look at anything else, then ask whether the trade area realistically produces it. Kill the deal at this step if it fails — it is the cheapest step to fail at.

Skipping Item 19 or accepting its absence. The Franchise Disclosure Document's Item 19 is where financial performance representations live, and a franchisor is not required to make any. No Item 19 means you are underwriting on vibes. Even when it exists, read what it excludes: it may report only company-operated units, only units open more than two years, or only the top quartile. *Countermeasure:* demand the distribution, not the average — how many units are above and below the mean, and what the bottom decile does. And read Item 20's unit count table, which shows openings, closures, terminations, non-renewals, and transfers for the last three years. Closures and transfers are the tell. A system where transfers exceed new openings is a system where existing franchisees are trying to get out.

Calling three hand-picked franchisees and calling it validation. The franchisor will give you a list. That list is curated. *Countermeasure:* Item 20 also requires contact information for franchisees who left the system in the last fiscal year. Call those people. Ask the specific questions: actual hours worked in year one and year two, actual net profit in year three, what the franchisor did when sales dropped, and whether they would sign again. Ask what the remodel cost when it came due. If a meaningful share say no, that is your answer, and it is worth more than any pro forma.

Under-modeling pre-opening and working capital. Operators budget construction precisely and everything else loosely. You will pay four to six weeks of full payroll before you take a dollar, you will run a friends-and-family and a soft open at negative margin, and your first ninety days will not hit pro forma. *Countermeasure:* fund a working capital reserve equal to at least three months of full fixed costs, held separately and not touchable for construction overruns. Then budget construction contingency separately at 10–15%, because second-generation spaces hide surprises behind walls — undersized electrical service, a grease interceptor that no longer meets code, an HVAC unit at end of life, and ADA upgrades triggered the moment you pull a permit.

Personal guarantees stacked without limit. You will likely personally guarantee the lease, the SBA loan, and possibly the franchise agreement's performance obligations. Three unlimited guarantees on one project is how a business failure becomes a personal one. *Countermeasure:* negotiate burn-off provisions on the lease guarantee tied to months of on-time payment, cap the guarantee at a stated dollar amount plus a set number of months of rent, and ask for a good-guy clause that limits exposure if you surrender the space in good condition with notice.

Ignoring off-premise fit. Delivery and takeout are a structural share of casual-dining revenue now, and a menu built for plated dine-in performs poorly in a bag. Cream sauces break, fried items steam, and a dish that is excellent at the table gets a two-star review at a kitchen counter twenty minutes later. *Countermeasure:* design a deliberate off-premise menu that is a *subset* of the main one — baked pastas, lasagna, family-style trays, pizzas if you have the oven — and refuse to sell the items that don't travel. Price the third-party commission into those items explicitly rather than absorbing 15–30% out of an already thin margin. Push first-party ordering hard; the commission difference on even 20% of off-premise volume is real money.

Assuming brand nostalgia converts to traffic. Older guests remembering a chain fondly is not the same as older guests driving to it weekly. Nostalgia produces a strong opening month and a soft month four. *Countermeasure:* underwrite to steady-state, not to the honeymoon. Build your pro forma on month 13 through 24, and treat the opening bump as a working-capital cushion rather than as evidence the model works.

Signing a long agreement with a shrinking system. A ten- or twenty-year term binds you to a brand whose trajectory you cannot control. *Countermeasure:* if you proceed at all, push for a short initial term with renewal options at your election, a fee holiday or reduced royalty for the first two to three years, a written waiver or deferral of the remodel obligation, explicit territorial protection with a radius you specify, and a transfer clause that does not let the franchisor block a sale unreasonably. A distressed franchisor that will not move on any of these is telling you the relationship's terms, and you should listen. Have a franchise attorney — not your general business lawyer — read the FDD and the agreement. It is a few thousand dollars against a multi-million-dollar commitment.

Related questions

Is buying an existing franchised unit safer than signing a new agreement?

Generally yes. An operating unit has trailing sales, a staffed kitchen, a guest base, and a landlord relationship you can diligence. A new agreement is a bet on a pro forma. Insist on three years of P&Ls, tax returns to corroborate them, franchisor transfer consent in writing, and a lease with ten-plus years of remaining term.

What occupancy cost is too high for full-service Italian?

Above roughly 10% of sales you are structurally impaired, because rent is fixed while sales are not. Target 6–9%. Compute the required average unit volume directly from the rent, then judge whether the trade area actually produces it. That single calculation kills more bad deals than any other diligence step.

Does a wood-fired oven or display kitchen justify the extra capital?

Only if it drives check average or traffic measurably. Display cooking adds $50K–$150K in equipment plus ventilation and permitting complexity, and it constrains your line layout permanently. It earns its place in a market where diners will pay a premium for visible craft, and it is dead weight in a value-driven trade area.

Would a fast-casual Italian concept perform better on the same capital?

Frequently. Capital drops to roughly $400K–$900K per unit, labor falls from the mid-30s to the mid-20s as a percentage of sales, and the menu travels for delivery. Average unit volume is lower, but you can open two or three units for what one full-service box costs, which diversifies location risk.

How much should I discount a brand with no presence in my market?

Substantially. Awareness lift approaches zero where the brand has no local footprint, yet the royalty and ad fee are unchanged. Budget $100K–$300K of local marketing across the first eighteen months to build recognition you are simultaneously paying a national fee for — and ask whether an independent concept would spend that better.

FAQ

What is the current state of Romano's Macaroni Grill as a franchise opportunity?

The chain contracted sharply after Chapter 11 filings in 2008 and 2017 and several ownership changes. It now operates a small footprint relative to its peak, and domestic franchising is limited — where expansion activity exists it has skewed international and non-traditional. Any terms presented to you should be verified directly against a current Franchise Disclosure Document rather than accepted from a broker's summary, and the unit-count table in Item 20 should be read before anything else in the document.

How much capital would a comparable full-service Italian restaurant require?

Ground-up or full conversion of a vanilla shell generally runs $1.5M to $3M all in, including buildout, kitchen and bar equipment, signage, opening inventory, pre-opening payroll, grand-opening marketing, and a working capital reserve. A second-generation space with an intact hood, grease interceptor, and bar can land materially lower — often $800K to $1.4M — which is precisely why former chain pad sites attract buyers. Lenders will typically want 20–30% equity in the project.

What do royalty and marketing fees actually cost in practice?

Full-service casual-dining systems commonly charge 4–6% royalty plus 1–3% advertising, so 5–9% of gross sales combined, and some systems add technology or local-marketing minimums on top. On $2.6M in sales that is $130K to $234K annually, paid whether or not the unit is profitable. Against a 6–12% store-level EBITDA, the fee load is often larger than the profit — which is why the value the brand delivers has to be measured, not assumed.

What margins should I expect on a full-service Italian unit?

Store-level EBITDA before debt service realistically runs 6–12% for a franchised unit in a good year and somewhat higher for a well-run independent that keeps the royalty. Food and beverage cost lands at 29–33%, labor at 32–38%, occupancy at 6–10%, and other operating expense at 14–20%. Cash-flow break-even typically arrives 9 to 18 months after opening, and a distressed brand pushes that toward the far end of the range.

What are the biggest risks specific to a distressed brand rather than the segment?

Three compound on each other: the advertising fund shrinks in absolute dollars while your percentage contribution stays fixed; supply chain leverage erodes so proprietary items get thin or expensive; and field support consolidates or disappears, leaving you paying a royalty for operating expertise that no longer exists. Meanwhile every obligation running the other direction — remodel mandates, transfer approvals, non-competes, personal guarantees — remains fully enforceable against you.

Is an independent concept genuinely better, or does that just sound better?

It depends entirely on your experience. An independent keeps the fee load, which on $2.6M is $180K–$260K a year and frequently the difference between viable and not, and it lets you change a failing dish in a week. But it hands you no recipe library, no training system, no purchasing co-op, and a harder financing conversation. For an operator who has run full service, independent usually wins. For a first-time operator, a *growing* franchise system's playbook is worth paying for — just not a contracting one's.

Sources

• https://www.ftc.gov/business-guidance/resources/franchise-rule-compliance-guide
• https://www.sba.gov/funding-programs/loans/7a-loans
• https://restaurant.org/research-and-media/research/
• https://www.restaurantbusinessonline.com/
• https://www.nrn.com/
• https://www.franchise.org/
• https://www.franchisebusinessreview.com/
• https://www.bls.gov/iag/tgs/iag722.htm
• https://www.uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
• https://www.ibisworld.com/united-states/market-research-reports/italian-restaurants-industry/

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