Should I open or buy a McAlister's Deli franchise in 2027?

Building versus buying an existing unit

The question "should I open or buy" hides two genuinely different businesses wearing the same logo, and most candidates never separate them before they start filling out applications.

Opening new means you sign a franchise agreement (or, more likely in 2027, a multi-unit development agreement), then spend twelve to eighteen months on site selection, lease negotiation, permitting, build-out, equipment procurement, hiring, and training before a single sandwich crosses the counter. Your capital goes out in a staged burn: franchise fee at signing, architectural and permitting spend in months two through five, the big construction draw in months six through eleven, then equipment, opening inventory, and pre-opening payroll in the final sixty days. You carry rent from lease commencement, often two to four months before you can legally open. The upside is that everything is yours to design — the site, the drive-thru or pickup lane, the patio, the kitchen line configuration, the general manager you hire from scratch, the catering pipeline you build before opening day. The downside is that you own every dollar of build-cost inflation and every week of permitting delay, and you have no revenue history to underwrite against.

Buying a resale means acquiring an operating unit from an existing franchisee, usually through a business broker, sometimes through a quiet intra-system transfer the franchisor facilitates. You inherit a P&L, a lease with known terms and known remaining years, an existing crew, an existing catering book, and a customer base that already knows the address. Restaurant resales in this category commonly trade on a multiple of seller's discretionary earnings — roughly three-and-a-half to four-and-a-half times SDE is the range brokers quote for stable franchised fast-casual — which frequently prices below replacement cost. That gap is the entire argument for buying: you can sometimes acquire $1.8M of annual revenue for less than it would cost to build the box that produces it, and you skip the eighteen-month ramp entirely.

The catch is adverse selection. Units come to market for reasons, and the reasons are rarely "I'm thrilled with this asset and want to give someone else a turn." The common ones: the lease is approaching a renewal the landlord intends to reprice sharply; a deferred remodel obligation is coming due under the franchise agreement; a competitor opened eighteen months ago and traffic has been sliding since; the general manager who actually ran the unit left and the owner discovered they had bought a job they didn't want. None of those are automatically disqualifying — a repriceable lease can be renegotiated, a remodel can be budgeted, a competitor can be out-executed — but every one of them needs to be priced into your offer rather than discovered in month four.

There's also a third path most candidates ignore: buying into an existing operator's platform rather than buying an individual unit. Large multi-unit franchisees periodically raise outside equity for development capital, and a passive or semi-passive minority stake in a fifteen-unit operator delivers restaurant exposure without requiring you to personally build operating infrastructure. Returns are lower and control is minimal, but so is the odds of catastrophic loss. This is closer to a private-credit or private-equity position than a franchise purchase, and it should be underwritten that way — you are betting on the operator, not the brand.

How to decide between them

The decision is not a coin flip weighted by preference. It's a sequence of gates, and each one eliminates candidates who genuinely should not proceed down that particular branch.

Gate one is qualification, and it's binary. If you cannot document the liquid capital and net worth thresholds, no amount of enthusiasm changes the outcome — the franchisor's development team screens on these numbers before a human ever reads your operating history. Being close does not count. If you're at $500K liquid against a $750K requirement, your realistic options are partnering with a capitalized operator, buying a smaller-format concept outright, or waiting.

Gate two is operating bench depth. This is the one candidates most consistently overestimate about themselves. The relevant question isn't "have I managed people" — it's "do I currently have, or can I hire within ninety days, a general manager capable of running a $1.8M-volume restaurant with thirty-plus employees across two dayparts without my daily presence?" If the honest answer is no, opening new is a very hard road, because the first eighteen months of a new unit demand the owner physically present at fifty-plus hours a week while simultaneously building systems. A resale with a tenured GM in place solves that problem for a price.

Gate three is time horizon and cash-flow need. A new build produces zero cash for roughly a year and a half, then ramps for another year before it hits a stable run rate. If you need distributions inside twenty-four months — because you left a W-2 income, because you have partners expecting returns, because your personal burn requires it — a new build will strain you at exactly the moment the unit needs your full attention. A resale that's already cash-flowing solves the timing problem, though your purchase price will reflect that.

Gate four is real estate access. This one quietly determines more outcomes than menu, marketing, or management combined. The strongest suburban sites in growing trade areas are not sitting vacant waiting for a franchise candidate to call — they are controlled by developers who pre-lease to national credit tenants, and access runs through tenant-rep brokers with existing relationships. If you cannot get a credible broker to take you seriously as a tenant, you cannot build new in the market you want, and you should be shopping resales in that trade area instead.

The diagram compresses a decision most people make emotionally into the order it should actually be made. Notice that "buy a resale" is not the consolation branch — it's the correct answer for a large share of qualified candidates, and treating it as second-best is how people end up building units they lack the bench to operate.

One more filter worth applying before either branch: is this brand the right fit for your market, independent of your qualifications? McAlister's carries genuinely distinctive brand equity in the South and lower Midwest — the sweet tea and oversized baked potatoes function as category-of-one menu items with real recall. That equity does not transfer evenly. In dense urban lunch corridors with heavy independent sandwich-shop competition, the suburban positioning has historically been a harder sell. Building a strong brand's weak-market unit is a worse outcome than building an average brand's strong-market unit, and the FDD will not tell you which one you're doing.

The numbers behind each path

Underwriting is where the two paths diverge most concretely, because they're funded differently, they carry different risk, and lenders treat them differently.

The build. Total initial investment for a new unit runs roughly $1.25M to $2.45M. That spread is not noise — it is almost entirely site condition and market. The low end assumes a second-generation restaurant space with usable existing infrastructure in a moderate-cost market; the high end assumes ground-up construction or a shell requiring full mechanical, electrical, and plumbing build-out in a high-cost labor market. The components break roughly into build-out and leasehold improvements (the largest bucket by far), equipment, signage and point-of-sale technology, then pre-opening costs covering training, initial inventory, and working capital. The franchise fee sits around $35,500 per unit.

The ongoing burden matters more to long-run returns than the build cost does. Royalty runs 5% of gross sales, national marketing 3.99%, and local marketing carries a further minimum — call it roughly 10% off the top before you've bought a single pound of turkey. That is squarely in the normal range for a supported national brand, but it means every operational inefficiency comes out of a smaller pool than an independent operator would have.

Run the arithmetic on a unit performing at the systemwide average. On roughly $1.79M in sales: food cost near 30% consumes about $537K; labor including salaried management near 32% consumes about $573K; royalty and marketing at roughly 10% takes about $179K; occupancy near 8% takes about $143K; other operating costs near 6% take about $108K. What's left is roughly $250K of restaurant-level EBITDA — about a 14% margin, which is a genuinely healthy result in fast casual.

Then layer debt. Finance a meaningful share of a $1.45M project on a ten-year SBA-style amortization at rates in the double digits and annual debt service runs well into six figures — plausibly around $144K on a $900K note. The owner-operator nets roughly $107K in cash on top of the salary they aren't paying an outside GM. That's a real income, but it is not the passive-wealth outcome franchise marketing implies, and cash-on-cash payback on the equity lands in the six-to-seven-year range before any real-estate appreciation.

The variance is what should govern your underwriting. Top-quartile units run closer to $2.29M AUV; bottom-quartile units closer to $1.31M. That's a 75% spread from bottom to top, and the entire difference in outcome is site, management, and catering execution. Underwrite to the systemwide average and you have built no cushion. Underwrite to bottom-quartile volume and see whether you still service debt — if you can't, the deal only works if you're certain of above-average execution, and certainty is expensive.

The resale. Different math entirely. You're buying trailing cash flow, so you underwrite the P&L you can verify rather than the pro forma you can imagine. The critical adjustments: normalize the seller's compensation to what a market-rate GM would actually cost, because owner-operators routinely report SDE that includes labor they personally performed; strip out any one-time items inflating the trailing year; add back genuine non-recurring expenses; and — the one buyers miss most often — reserve for the remodel obligation. Franchise agreements typically require refresh at defined intervals, and a unit approaching that trigger carries a six-figure liability the seller has every incentive not to emphasize.

Lease term is the other pricing lever. A unit with three years remaining and no renewal options is a fundamentally different asset than the same unit with twelve years of term and two five-year options, because in the first case you're buying equipment and goodwill you may not control long enough to amortize. Price accordingly, or negotiate the renewal before closing.

Catering is the swing factor on both paths. The catering channel represents a substantial share of revenue at this brand — meaningfully north of a fifth at units that run it well — and it is the single largest differentiator between bottom-quartile and top-quartile performance. Catering revenue carries better margin than dine-in because it arrives in large, scheduled, low-labor-per-dollar batches. Two units with identical rent, identical menu, and identical footprint can be separated by hundreds of thousands in annual revenue purely on whether someone owns the catering relationship with the office parks, schools, hospitals, and churches inside a five-mile radius. When you evaluate a resale, ask for catering as a percentage of sales and the concentration of that book — a catering business that's 60% one hospital system is a risk, not an asset.

Sequencing the work if you proceed

The order in which you do things determines how much money you can lose before you learn something disqualifying. Structure the process so the cheap information comes first.

Weeks one and two: self-qualify honestly and pull the disclosure document. Confirm the liquid capital, net worth, and operating-experience thresholds against your actual balance sheet, not your optimistic one. Then request the Franchise Disclosure Document and read Items 5, 6, 7, 11, 17, 19, and 20 completely. Item 19 gives you the financial performance representation, Item 20 gives you the franchisee contact list and — critically — the turnover table showing terminations, transfers, and non-renewals over the prior three years. That table is the most honest document in the package. Build a five-year unit pro forma with sensitivity at plus and minus 25% on volume.

Weeks three and four: territory analysis before anything else. Use a mobility-data or site-selection platform to identify target trade areas by household count, median income, and daytime employment density within a three-mile radius. Then overlay the existing unit map. You are not looking for empty states — greenfield markets carry brand-awareness costs a single operator cannot absorb. You are looking for density-fill gaps adjacent to units that already perform, where the brand is known and the marketing spend already reaches your trade area.

Weeks five and six: validation calls, and make them real. Contact at least a dozen existing franchisees from Item 20, and deliberately include units that recently transferred or closed — the exiting operators tell you things the thriving ones won't. Ask specific, uncomfortable questions: what did your build actually cost against the Item 7 range, what is your restaurant-level margin in years two and three, what is your GM turnover, what percentage of sales is catering, would you sign again today. Fifteen minutes each buys you more than a hundred hours of desk research.

Weeks seven and eight: real estate. Engage a tenant-rep broker with genuine restaurant experience and issue letters of intent on two or three sites so you have leverage rather than a single option. Confirm rent, tenant improvement allowance, drive-thru or pickup-lane permitting feasibility, and — often overlooked — the co-tenancy and exclusivity clauses that determine whether a competing sandwich concept can open in your center.

Weeks nine and ten: financing. Pre-qualify with a lender that actually does restaurant deals. Generalist banks underwrite restaurants badly and slowly. A preferred lender with a restaurant practice will tell you in a week whether your deal is fundable and at what leverage, which is information worth having before you sign a lease.

Weeks eleven through thirteen: formal application, discovery day, and agreement negotiation. By this point you should be deciding whether to sign, not whether to investigate. Negotiate development territory boundaries carefully and push for a right of first refusal on adjacent trade areas — the value of a multi-unit agreement is largely in the option value of the territory you haven't built yet.

The sequencing principle generalizes well beyond restaurants: front-load the decisions that cost nothing to reverse, and defer the ones that cost everything. Pulling an FDD is free. Signing a fifteen-year lease is not.

What the adjacent options actually look like

If the capital requirement or the multi-unit awarding policy rules you out, the comparison set is worth understanding rather than dismissing, because "a smaller concept" is not a downgrade — it's a different risk profile.

Lower-investment sandwich concepts — the sub-focused national brands with smaller footprints — typically require a fraction of the capital, run simpler kitchens with fewer stations, and are far friendlier to single-unit first-time franchisees. They also generate lower average unit volumes, which means less absolute cash flow per unit but often comparable or better cash-on-cash returns because the denominator is so much smaller. The strategic trade-off: a smaller box gives up the catering and large-party revenue that drives the upside in the McAlister's model, so the ceiling is lower even when the floor is safer.

Smaller-system direct competitors — regional deli and bakery-cafe brands with under a couple hundred units — offer less saturated territory and sometimes better development terms, at the cost of a thinner marketing fund, less mature supply-chain leverage, and materially more brand risk. A hundred-unit system has fewer resources to absorb a bad year, and its franchisees feel that directly.

Non-lunch dayparts — smoothie, coffee, and breakfast-weighted concepts — solve a structural problem worth naming. McAlister's does the majority of its business in a narrow midday window, roughly 11am to 2pm. That concentration is efficient when it works and brutal when it doesn't: a trade area that loses a large employer loses a disproportionate share of your revenue, and you have no other daypart to absorb the hit. Concepts with breakfast or evening volume spread that risk across more hours.

Adjacent service franchises — home services, auto services, fitness — deserve a look from candidates whose real constraint is capital rather than interest in food. Many carry six-figure rather than seven-figure investments, avoid the perishable-inventory and food-safety exposure entirely, and run on far smaller headcount. The trade is lower ceiling per unit and, in many cases, more direct dependence on the owner's own sales effort.

This is where a franchise decision starts resembling any other capital-allocation problem, and the discipline that makes it work is the same discipline good RevOps teams apply to a pipeline: define the qualification criteria before you fall in love with a specific deal, gather evidence in the cheapest order available, and hold your walk-away threshold when the data comes back worse than the pitch. A franchise candidate who validates twelve franchisees and then walks has run the process correctly. The failure mode in both domains is identical — spending so much on diligence that sunk cost drags you into signing.

The last consideration is portfolio construction. A single restaurant unit is an undiversified, illiquid, management-intensive asset with meaningful concentration risk in one trade area. Multi-unit operators earn better returns not because they're better operators — though they usually are — but because they can spread a general-manager bench, a catering sales function, and a bookkeeper across five units instead of one. That overhead leverage is the actual reason franchisors prefer multi-unit developers, and it's the same reason a solo unit is harder than it looks. If you're going to be in this business, plan the second and third units before you open the first, even if you don't build them.

Related questions

Is buying a resale always cheaper than building new?

Usually but not always. Resales commonly trade below replacement cost, which is the core appeal. But a unit with a short lease, a pending remodel obligation, or a declining trailing trend can cost more after those adjustments than a clean new build in a better trade area.

How long before a new unit reaches stable volume?

Plan on twelve to eighteen months from signing to opening, then another twelve months of ramp before the unit settles into a repeatable run rate. Opening-week volume is nearly meaningless — manage to trailing ninety-day performance instead.

Can I run a unit as an absentee owner?

Not in the first eighteen months of a new build, realistically. A resale with a tenured general manager makes semi-absentee ownership plausible, but you still need weekly financial review and a real management contingency plan when that GM leaves.

What single factor most separates strong units from weak ones?

Catering execution, followed closely by site selection. Two units with identical rent and footprint can differ by hundreds of thousands in annual revenue based purely on whether someone actively owns the relationships with nearby offices, schools, and hospitals.

Does the franchisor ever approve single-unit first-timers?

Occasionally, typically for resales or in markets where an existing operator is exiting. But new development agreements now skew heavily toward experienced multi-unit developers, so plan around that rather than hoping for an exception.

FAQ

What does it actually cost to open a McAlister's Deli location?

Total initial investment runs roughly $1.25 million to $2.45 million per unit, including a franchise fee near $35,500. The spread reflects site condition more than anything else — a second-generation restaurant space with usable infrastructure lands near the low end, while ground-up construction in a high-cost market lands near the high end.

What are the ongoing fees?

Royalty is 5% of gross sales, the national marketing fund is 3.99%, and local marketing carries an additional minimum. Combined, expect roughly 10% of gross sales committed before food and labor. That's typical for a supported national brand, but it means operational inefficiency comes out of a smaller pool.

What revenue and profit should I underwrite to?

Systemwide average unit volume sits near $1.79 million, with top-quartile units meaningfully higher and bottom-quartile units meaningfully lower. Restaurant-level EBITDA of 12–18% is the healthy range. Underwrite to the bottom quartile and confirm you still service debt before you sign anything.

How long is the payback period?

Five to seven years on equity for a typical operator, before any real estate appreciation. Faster if you land a strong site and build a serious catering book early; slower if you open undercapitalized or fight permitting delays that push your opening past a full season.

Should I buy an existing unit instead of building?

Often yes, if you lack a management bench or need cash flow within two years. You inherit a verified P&L, an existing crew, and a catering book, and you skip the ramp. The trade-off is adverse selection — understand precisely why the seller is selling before you price the deal.

What disqualifies most candidates?

Insufficient liquid capital, no multi-unit operating history, and no realistic access to quality real estate. The first two are screened by the franchisor before a human reads your application. The third you discover on your own, usually after a broker stops returning calls.

Sources

• https://www.ftc.gov/business-guidance/resources/franchise-rule-compliance-guide
• https://www.sba.gov/funding-programs/loans/7a-loans
• https://www.franchise.org/
• https://www.nrn.com/
• https://www.qsrmagazine.com/
• https://www.restaurantbusinessonline.com/
• https://restaurant.org/research-and-media/research/
• https://www.franchisetimes.com/
• https://www.bizbuysell.com/
• https://www.bls.gov/iag/tgs/iag722.htm

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