Pepper Lunch Franchise Cost, Revenue & Review 2026
Data from FDD filing
Analysis by FranchiseVerdict Research · Methodology
Pepper Lunch is a fast-casual franchise where guests cook sizzling teppan rice and noodle plates on hot iron plates at their tables. Franchisees run the restaurants, managing food prep, staffing, and service.
FranchiseVerdict summary · 2026
A Pepper Lunch franchise requires a total initial investment of $691K – $1.7M, including a $50K franchise fee and an ongoing 5.0% royalty[2]. Per the 2026 FDD, average unit revenue was $1.7M[2]. FranchiseVerdict grade: B (Above average), an editorial assessment, not investment advice. Run a live ROI scan →
Data last verified · figures per the 2026 FDD issuance
Overview
- Investment
- $691K – $1.7M
- 87th pct Service Resta…
- Avg gross sales
- $1.7M
- 27th pct Service Resta…
- Royalty
- 5.0%
- 11th pct Service Resta…
- Units
- 8
- 33rd pct Service Resta…
- SBA charge-off
- N/A
Quick verdict · Quick-Service Restaurants · color = vs category peers
Green = favorable by >10% vs Quick-Service Restaurants avg · No shading = within ±10% · Red = unfavorable by >10% · Source: FDD filings + SBA 7(a)
Data from public FDD filings and SBA records. Not financial advice. Methodology
Bottom line
- COSTTotal investment $691K – $1.7M including a $50K franchise fee, 5.0% ongoing royalty.
- RETURNSAverage unit revenue of $1.7M/year (median $1.4M).
- RISKVerdict B (Above average), verdict score 51/100 (higher is better).
- EARLYEmerging franchise: only 3 years of franchising with 8 units. Early-stage systems carry higher risk but may offer better territory availability.
Item 1 · who you're contracting with
The Franchisor
Corporate structure & franchisor financials
- Legal entity
- Hot Palette America Incorporated
- Parent company
- Hot Palette Holdings Co., Ltd.
- Predecessor
- Hot Palette Holdings Co., Ltd. (also predecessor); formerly Pepper Food Service Co., Ltd. (PFSC)
- Prior franchisor entity
- CEO title
- Chief Executive Officer
- Troy Hooper
- Incorporated in
- California
- HQ
- 2625 Townsgate Road, Suite 340, Westlake Village, California 91361
- Auditor
- Albert & Associates, Certified Public Accountant
- Audited financials
- Franchisor revenue
- $28K
- vs $0 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
- CEO
- Troy Hooper
- Headquarters
- California
- Founded
- 2022
- FDD year
- 2026
- States available
- 6
Can you afford it, and what does the money buy?
Entry cost runs 80% above the typical quick-service restaurants franchise.
Source: FDD 2026 · Items 5–7
Full Item 7 breakdown30 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.
Item 7 · what it costs to open + operate
The Vitals
- Total investment
- $691K – $1.7M
- Bottom third — review vs category
- Liquid capital req'd
- $25K – $50K
- Middle of category vs category
- Franchise fee
- $50K – $50K
- Bottom third — review vs category
- Royalty
- 5.0%
- percentage · 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 | $10K |
| Transfer fee | $25K |
| Renewal fee | $50K |
| Inventory (initial) | $15K – $25K |
| Total fee load | 7.0% of rev |
What do units actually make?
Average unit sales run 40% above the quick-service restaurants norm.
Source: FDD 2026 · Item 19
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
$255K
15.0% margin
Unlevered ROIC
21%
EBITDA / total invested capital
Payback
4.8 yrs
cash-on-cash, unlevered
ROI & LBO modelsSingle-unit · 25-unit portfolio · editable
What one unit earns on your invested capital
Model A · Single-Unit Return
Computes unlevered return on invested capital (ROIC) for a single franchise unit. The target band for an attractive franchise is 30–60% ROIC. Below that and a passive index fund likely outperforms; above that and the franchisor has pricing power you're subsidizing.
Note: Item 19 revenue is what the franchisor discloses. It's the top line only. Operating costs below are category estimates. Override them to match your real lease quote, labor market, and build-out budget.
Returns model · single-unit ROIC
What would one Pepper Lunch unit return on the cash you put in?
Unlevered ROIC · per unit
Estimated return on your total franchise investment, before any debt financing.
21%
Below the 30–60% attractive-franchise band
What 25 units return when you use SBA financing
Model B · Return on Equity: Debt-Financed Acquisition
Models a 25-unit portfolio acquisition financed with an SBA 7(a) loan. Shows equity IRR (your return on cash invested), DSCR (how safely the cash flow covers debt service), and the capital stack (SBA + seller + equity breakdown).
This is the “search fund” or “entrepreneurship through acquisition” scenario: you buy an existing multi-unit operator, use leverage to amplify returns, and either operate or hire management. The 25-unit size is the typical minimum for an SBA-backed franchise portfolio acquisition to pencil as a full-time income.
What “return on equity” means here: if you put in $500K of your own cash and the business generates enough EBITDA to pay down debt and grow, your equity IRR is the annual return on that $500K, including the value created when you eventually sell. Target IRR for a search fund is typically 25–35%.
Levered LBO scenario · Yale Crease Capital framing
What would 25 Pepper Lunch units return on equity?
Equity IRR · 5-yr
36.6%
4.76× MOIC
Year-1 DSCR
2.25×
EBITDA ÷ debt service
Equity required
$4.5M
on $13.6M purchase
Total debt
$9.1M
SBA $5.0M + senior + seller note
These models are for research and scenario planning only. Not investment advice. Actual results depend on your specific location, management, and market conditions. Consult a franchise attorney and accountant before signing any franchise agreement.
Item 19 · Source: 2026 FDD
Financial Performance
- Avg gross sales
- $1.7M
- Per unit, per year
- Median gross sales
- $1.4M
Gross sales are revenue before expenses — not profit. Actual owner earnings depend on rent, labor, royalties, marketing fees, and debt service.
- Item 19 type
- historical average/median/high/low gross sales table
- Sample size
- 8 outlets
- vs category median 20 · small
- Range (low → high)
- $568K→$3.1M
- Cohort dispersion (min → max)
- Transparency tier
- revenue_only
- Categorical assessment of disclosure depth
- Reporting year
- 2025
- Fiscal year the figures cover
- Source filing
- FDD 2026
- Disclosed in the 2026 filing, covering 2025
- Transparency
- 4 / 10
- vs category median 4 / 10 · typical
Compared against 782 Quick-Service Restaurants brands
Operator outlook
What the numbers say
Data-driven interpretation of this brand's financial disclosures, fee structure, and system trajectory.
Unit economics
Average unit generates $1.7M/year in gross sales. Median is $1.4M — top performers pull the average up, so a typical unit earns less. Revenue-to-investment ratio: 1.4x.
Fee burden
Total ongoing fee load of 7.0% (near the Quick-Service Restaurants average).
Disclosure
Transparency score 4/10 — this franchisor discloses detailed breakdowns (quartiles, segments, or cohort data). Buyers can model unit economics with higher confidence.
Operator retention
Net unit growth of +33.3% over 3 years (3 opened, 0 closed).
Source: FDD Item 19 financial performance representations and publicly filed FDD data. Past performance is not indicative of future results. Verify all figures with the franchisor and current franchisees before making any investment decision.
vs Quick-Service Restaurants averages
How Pepper Lunch Compares
Is the system healthy?
Source: FDD 2026 · Item 20
Unit growth
Item 20 · unit dynamics
The Growth Chart
- Total units
- 8
- Opened
- 3
- Last reporting year
- Closed
- 0
- Terminated
- 0
- Franchisor ended the franchise (per Item 20)
- Non-renewed
- 0
- Term expired, not renewed (per Item 20)
- Turnover rate
- 0.0%
- Company-owned
- 0
- Corporate units in the system
- % franchised
- 100%
- vs corporate-owned
- Net growth (3-yr)
- +33.3%
- Net unit change over 3 years
- 3-yr CAGR
- +33.3%
- Compounded over last 3 years
3-year detail · Item 20
- Opened (3yr)
- 3
- Closed (3yr)
- 0
- Terminated (3yr)
- 0
- Non-renewed (3yr)
- 0
- Transfers (3yr)
- 0
- Reacquired (3yr)
- 0
- Franchisor bought back
- 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 · 6 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).
Fast growth in a small system. Newer franchisors expanding quickly may not yet have the support infrastructure of larger systems.
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.
What could kill this investment?
Source: SBA 7(a) FOIA · FDD Items 3, 21
Risk analysis
FranchiseVerdict rating + FDD Items 3, 4, 8, 16, 21
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 this Item.
Largest disclosed settlement: $150,000
Bankruptcy (Item 4)
None disclosed
Audited financials (Item 21)
Yes · Albert & Associates, Certified Public Accountant
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 51 / 100 verdict
- 01MEDUnit count declined 16.7% YoY (5 units) indicating system contraction and potential viability concerns
- 02MINORHigh investment-to-revenue ratio (41-104% of initial investment recovered annually) creates extended breakeven period
- 03MINORSmall franchisee base (5 units) limits peer support network and suggests brand scaling challenges
- 04HIGHGoing 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
What are you signing up for?
Ongoing fees run about 7.0% of sales (royalty + ad fund), before rent and labor.
Source: FDD 2026 · Items 11, 12, 17
FDD Items 12, 15, 17 · continued from Risk & Legal
Contract & Territory Detail
| Initial term | 10 years |
|---|---|
| Renewal term | 10 years |
| Allowed renewalsℹ | 1 |
| Territory type | protected |
| Protected territory | Yes |
| Exclusive territoryℹ | No |
| Online sales rightsℹ | Restricted |
| Franchisor can compete | Yes |
| Hire a manager? | Not 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 | 10 days |
| Termination groundsℹ | 20 |
| Curable defaultsℹ | 2 |
| Mandatory arbitration | No |
| Arbitration location | Los Angeles County, California |
| Jury trial waiver | Yes |
| Governing law | California |
| Litigation count | 0 |
View Item 3 litigation summary
No litigation is required to be disclosed in this Item.
Items 10, 11
Training & Operations
- Classroom training
- 18 hrs
- On-the-job training
- 160 hrs
- Training location
- Los Angeles, California (or other location designated by Franchisor)
- Ongoing training
- Required
- Time to open
- 10 mo
- From signing to launch
- Site selection
- franchisee
- Franchisor financing
- Not offered
- Item 10
- POS system
- Toast
- Operating tech stack
Items 5 & 11
Franchisor Support
Technology: Toast
Item 20 · call current owners
Franchisee Contacts
13 owners to call
Name · phone · city · state. Extracted from FDD Item 20
FDD download
Pepper Lunch · FDD (2026) 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 $691K – $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 $1.7M. The median is $1.4M. Note: this is gross revenue, not profit. Actual owner earnings vary based on location, operating costs, and management.
What is Item 19 in the Pepper Lunch FDD?
The FDD section where a franchisor may disclose financial performance of its outlets. Disclosure is optional and formats vary; figures are typically gross sales, which is revenue before expenses, not profit. FranchiseVerdict extracts these figures directly from the Pepper Lunch FDD and qualifies whose outlets they describe.
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 8 total units in the United States, including 8 franchised units and 0 company-owned units. 3 new units were opened in the latest reporting year.
Is Pepper Lunch a good franchise to buy?
FranchiseVerdict rates Pepper Lunch as a B-grade franchise with a verdict score of 51 out of 100 (higher is better), 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.
For franchisors
Are you the franchisor?
If you represent Pepper Lunch, you can request corrections or provide updated information.
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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.