Pepper LunchFranchise Cost, Revenue & Review 2026
Data from FDD filing
FranchiseVerdict summary · 2026
A Pepper Lunch franchise requires a total initial investment of $657K – $1.7M, including a $50K franchise fee and an ongoing 5.0% royalty[2]. Per the 2025 FDD, average unit revenue was $1.6M[2]. Verdict grade: F. Run a live ROI scan →
Data last verified June 18, 2026 · figures per the 2025 FDD issuance
Overview
- Investment
- $657K – $1.7M
- 38th pct Service Resta…
- Avg gross sales
- $1.6M
- 17th pct Service Resta…
- Royalty
- 5.0%
- 7th pct Service Resta…
- Units
- 5
- 13th pct Service Resta…
- SBA default
- N/A
Quick verdict · Full-Service Restaurants · color = vs category peers
Green = >15% above Full-Service Restaurants avg · No shading = within ±15% · Red = >15% below avg · Source: FDD filings + SBA 7(a)
Data from public FDD filings and SBA records. Not financial advice. Methodology
Started franchising in 2023. Newer systems carry more uncertainty but may offer better territories.
The system contracted 17% year-over-year. Investigate why units are closing.
Bottom line
- Total investment $657K – $1.7M including a $50K franchise fee, 5.0% ongoing royalty.
- Average unit revenue of $1.6M/year (median $1.3M).
- Verdict F (Bottom Quintile) with a risk score of 90/100.
- Emerging franchise: only 3 years of franchising with 5 units. Early-stage systems carry higher risk but may offer better territory availability.
Item 1 · who you're contracting with
The Franchisor
- Legal entity
- Hot Palette America Incorporated
- Parent company
- Hot Palette Holdings Co., Ltd.
- CEO title
- Chief Executive Officer
- Troy Hooper
- Incorporated in
- CA
- HQ
- 2625 Townsgate Road, Suite 340, Westlake Village, California 91361
- Auditor
- Windes
- Audited financials
- Franchisor revenue
- $343K
- vs $28K prior year
- Management churn noted
- Frequent turnover
- Item 2 disclosed frequent executive changes
Independent franchisee associations
- Franchise Advisory Council (FAC)
Franchisee-led councils or alliances disclosed in Item 20. Indicates operator voice.
Overview
About
Franchisees operate table-top teppanyaki-style casual dining restaurants where customers watch chefs prepare grilled meats, seafood, and vegetables on heated steel plates at their tables. Daily operations include food prep, managing kitchen staff, table service, managing inventory for perishable proteins, and maintaining the specialized cooking equipment. Revenue depends on foot traffic, average check size, and operational efficiency in a labor-intensive service model.
- CEO
- Troy Hooper
- Headquarters
- CA
- Founded
- 2022
- FDD year
- 2025
- States available
- 3
FDD Item 7 · 2025 filing · 30 line items
Initial investment breakdown
| Line item | Low | High | |
|---|---|---|---|
| Initial Franchise Feenot refundable | $50K | $50K | |
| Architects & Engineers | $19K | $35K | |
| Site Review Feenot refundable | $0 | $500 | |
| Studies & Site work | $3K | $6K | |
| Business Licenses & Permits | $3K | $5K | |
| Professional Fees Legal/Accounting | $3K | $10K | |
| Beer/Wine License | $0 | $16K | |
| First Month's Rent and Security Deposit | $5K | $35K | |
| Utilities and Related Deposits | $5K | $10K | |
| Insurance - Annual Premium | $5K | $15K | |
| Tenant Improvements/Construction | $173K | $800K | |
| Design & Decor | $30K | $70K | |
| Equipment | $125K | $210K | |
| Furniture and Fixtures | $95K | $150K | |
| Smallwares | $11K | $15K | |
| Office Supplies | $1K | $3K | |
| Uniforms | $3K | $6K | |
| Signage | $8K | $50K | |
| Computers & POS | $21K | $25K | |
| Initial Inventory & Supplies | $15K | $25K | |
| Total initial investment | $812K | $1.8M |
Line items extracted from FDD Item 7. Ranges reflect the franchisor's stated low and high per line. Total is the sum of line-item lows / highs — actual costs may fall outside this range depending on market and build-out scope.
Single-unit · estimated
Returns at a glance
Indicative numbers using FDD Item 7 / Item 19 inputs and category-benchmarked cost ratios. Full single-unit, 25-unit portfolio, and LBO models (with every input editable to stress-test your own scenario) live on the financials page.
Store EBITDA · annual
$178K
11.0% margin
Unlevered ROIC
15%
EBITDA / total invested capital
Payback
6.8 yrs
cash-on-cash, unlevered
Item 7 · what it costs to open + operate
The Vitals
- Total investment
- $657K – $1.7M
- Better than avg vs category
- Liquid capital req'd
- $25K – $50K
- Better than avg vs category
- Franchise fee
- $50K – $50K
- Better than avg vs category
- Royalty
- 5.0%
- Gross Sales · typical 6–8%
- Ad fund
- 2.0%
- typical 3–5%
- Total fee load
- 7.0%
- vs 9–13% typical
Ongoing fees · Item 6
| Fee | Amount |
|---|---|
| Royalty | 5.0% of gross sales |
| Marketing / ad fund | 2.0% of gross sales |
| Technology fee | $300 |
| Training fee | $5K |
| Transfer fee | $25K |
| Renewal fee | $50K |
| Inventory (initial) | $15K – $25K |
| Total fee load | 7.0% of rev |
Financial Performance
- Avg gross sales
- $1.6M
- Per unit, per year
- Median gross sales
- $1.3M
- Item 19 type
- gross_sales
- Sample size
- 5 units
- vs category median 13 · small
- Range (low → high)
- $1.1M→$3.0M
- Cohort dispersion (min → max)
- Transparency tier
- revenue_only
- Categorical assessment of disclosure depth
- Transparency
- 4 / 5
- vs category median 4 / 5 · typical
Compared against 1264 Full-Service Restaurants brands
vs Full-Service Restaurants averages
How Pepper Lunch Compares
Unit growth
Item 20 · unit dynamics
The Growth Chart
- Total units
- 5
- Opened
- 0
- Last reporting year
- Closed
- 1
- Terminated
- 0
- Franchisor ended the franchise (per Item 20)
- Non-renewed
- 0
- Term expired, not renewed (per Item 20)
- Turnover rate
- 20.0%
- Company-owned
- 0
- Corporate units in the system
- % franchised
- 100%
- vs corporate-owned
- Net growth (yr3)
- -16.7%
- Net unit change last year
- 3-yr CAGR
- -16.7%
- Compounded over last 3 years
3-year detail · Item 20
- Transfers (3yr)
- 0
- Projected new
- 17
- Franchisor's next-year forecast
- Continuity rate
- 83.3%
- Units that stayed open
- Ceased ops
- 20.0%
- Units that stopped operating
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 7 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator. Not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee contact records (FDD Item 20). Shows states with at least one current operator on file. Full state registration data (Item 12) will appear on a future FDD refresh.
Available to sell in · Item 12
- Hawaii
States where the franchisor is registered to sell new franchises (FDD registration filings).
SBA loan performance
Government records
SBA Loan Data
Aggregated from SBA 7(a) and 504 loan disclosures, public data unique to FranchiseVerdict.
No SBA loan data available for this brand.
Risk analysis
FranchiseVerdict rating + FDD Items 3, 5, 6, 12, 17
Risk & Legal
Pepper Lunch presents meaningful caution-level risk due to shrinking unit count, undisclosed profitability metrics, and ambiguous going concern status, despite reasonable revenue figures and protected territories.
Litigation (Item 3)
No litigation is required to be disclosed in Item 3
Largest disclosed settlement: $150,000
Bankruptcy (Item 4)
None disclosed
Audited financials (Item 21)
Yes · Windes
Franchisor revenue (Item 21)
Franchisor entity revenue (not unit-level)
Supplier relationship · Items 8 & 16
- Franchisor sells you products: Yes
- Kickbacks from required suppliers: Yes
- Must buy proprietary products: Yes
- Restricted to system-approved products: Yes
- Can negotiate own supplier terms: No
Score breakdown · what drove the 90 / 100 rating
- 01MEDUnit count declined 16.7% YoY (5 units) indicating system contraction and potential viability concerns
- 02MEDNet income not disclosed in FDD Item 19 — impossible to assess actual profitability despite $1.6M average revenue
- 03MINORHigh investment-to-revenue ratio (41-104% of initial investment recovered annually) creates extended breakeven period
- 04MINORSmall franchisee base (5 units) limits peer support network and suggests brand scaling challenges
- 05HIGHGoing Concern statement is 'False' — unusual phrasing that may indicate accounting or structural issues worth clarifying
Severity inferred from the FDD text · not a regulatory classification
FDD Items 5, 6, 12, 17 · continued from Risk & Legal
Contract & Territory Detail
| Initial term | 10 years |
|---|---|
| Renewal term | 10 years |
| Allowed renewalsℹ | 1 |
| Territory type | Radius |
| Protected territory | Yes |
| Exclusive territoryℹ | No |
| Online sales rightsℹ | Restricted |
| Franchisor can compete | Yes |
| Hire a manager? | Allowed |
| Owner-operator | Required |
| Non-compete (years)ℹ | 2 years |
| Non-compete (miles)ℹ | 3 mi |
| Right of first refusalℹ | Yes |
| Transfer requires consent | Yes |
| Termination notice | 30 days |
| Curable defaultsℹ | 7 |
| Mandatory arbitration | No |
| Jury trial waiver | No |
| Governing law | California |
| Litigation count | 0 |
View Item 3 litigation summary
No litigation is required to be disclosed in Item 3
Items 10, 11
Training & Operations
- Classroom training
- 16 hrs
- On-the-job training
- 192 hrs
- Training location
- On-site and off-site
- Ongoing training
- Required
- Time to open
- 12 mo
- From signing to launch
- Site selection
- franchisee
- Franchisor financing
- Offered
- Item 10
- POS system
- Toast
- Operating tech stack
Items 5 & 11
Franchisor Support
Technology: Toast
Item 20 · call current owners
Franchisee Contacts
15 owners to call
Name · phone · city · state. Extracted from FDD Item 20
FDD download
Pepper Lunch · FDD (2025) PDF
Frequently asked questions
Frequently Asked Questions
How much does it cost to open a Pepper Lunch franchise?
The total investment to open a Pepper Lunch franchise ranges from $657K – $1.7M, with an initial franchise fee of $50K. This includes real estate, equipment, inventory, and working capital as disclosed in their Franchise Disclosure Document (FDD).
What do Pepper Lunch franchise owners earn?
According to Item 19 of the Pepper Lunch FDD, the average gross sales per unit is $1.6M. The median is $1.3M. Note: this is gross revenue, not profit. Actual owner earnings vary based on location, operating costs, and management.
What is Pepper Lunch's franchise failure rate?
SBA 7(a) loan charge-off data is not available for Pepper Lunch (fewer than 10 loans on file). Charge-off rates are one way to gauge franchise risk, but not all franchise loans go through the SBA program. We recommend reviewing turnover and closure data in the FDD and speaking with current franchisees.
How many Pepper Lunch franchise locations are there?
As of their most recent FDD filing, Pepper Lunch has 5 total units in the United States, including 5 franchised units and 0 company-owned units.
Is Pepper Lunch a good franchise to buy?
FranchiseVerdict rates Pepper Lunch as a F-grade franchise with a risk score of 90 out of 100, based on our analysis of investment costs, revenue data, SBA loan performance, and growth trends. Our rating is based solely on publicly available FDD and government data; we recommend speaking with current franchisees before making any investment decision. This is not investment advice.
Data sourced from public FDD filings and SBA 7(a) FOIA records. Not financial advice.
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Data extracted from public FDD filings and SBA 7(a) loan disclosures (FOIA). This information is provided for research purposes only and does not constitute financial, legal, or investment advice. Verify all figures with the franchisor's current Franchise Disclosure Document before making any investment decision.