Entry costs for franchising vary based on brand, location, industry (quick service restaurant, travel, beauty, etc.), and level of support. It’s important to fully understand the financial requirements to get your business started. Your decision to open one franchise brand over another may very well be influenced by the total investment amount. You will also need to know your total project cost when you are ready to explore funding options for your business.
So, what exactly are the costs involved in opening a franchise? There are two main categories – your initial start-up costs, which are typically one-time expenses and your on-going expenses, which are usually incurred on a monthly basis.
Startup Costs
Here are some common expenses associated with getting the doors of your franchise business open:
- Initial franchise/licensing – These are one-time fees to become a franchise, and usually range from $20,000 - $50,000 (although they can fall outside of that range).
- Furniture and fixtures
- Computer, telephone, security equipment
- Legal and accounting fees
- Loan payment (if applicable)
- Security deposit or down payment on property
- Utility deposits
- Permits, licenses, fees
- Prepaid insurance
- Starting inventory
- Business/office and other supplies
- Grand opening marketing/advertising
Ongoing Expenses
For most businesses, these costs occur once-per-month and are required to keep your business running.
- Rent or mortgage
- Owner salaries
- Payroll costs
- Franchise fees or royalties – These vary by franchisor, but are 4 to 6 percent of revenue on average
- Utilities
- Inventory
- Insurance
- Business/Office and other supplies
- Marketing/advertising
- Rentals
To help you get a better idea of your required investment and total project cost, we’ve created a start-up cost calculator for you!
As with any business, there are numerous costs involved with getting it started. The advantage of a franchise business is that you have the experience of the existing franchisees to use as a model. So, you have a much more accurate view of what you’re going to be paying.
