Buying a Franchise, Franchise Operations

How Much Does a Franchise Cost?

So you’re ready to start a franchise. Congratulations! Still, one thing might be holding you back – the franchise cost associated with starting the business of your dreams.

There’s more than meets the eye when it comes to starting a franchise. Here’s a more accurate look at what a franchise costs to start.

How Much Does a Franchise Cost?

#1. The Initial Franchise Fee

The franchise fee is the cost you pay to the franchisor’s brand. On the low end, you could pay less than $25,000 to start a franchise. On the high end, you could spend six figures. It depends on the brand.

There is more than meets the eye to a franchise fee, however. Once you’re up and running, you will likely be asked to pay royalties to the brand. These are manageable and are a small price to pay considering the wealth of support you’ll be receiving from the corporate office.

#2. Property Expenses

If you’re starting a franchise that requires a storefront (not a home-based franchise), you will also need to consider property expenses. Finding the right location for your franchise isn’t always easy. The place where you’re likely to get the most foot traffic could be out of your price range. Or, you might find the places you can afford could hide you away from generating enough attention to grow your business.

It’s about balance. Choose your location based on price and promotional opportunity.

#3. Marketing Expenses

Marketing your new franchise starts before you launch. Although much of the marketing is done by corporate, you will need to do a portion of it yourself. You need to spread the word to your community about your presence so they know who to call when they need something. This could require advertising, networking and other marketing tasks with a fee associated with it. The amount you’ll spend will depend on the style of marketing you deploy and the franchise you choose.

#4. Professional Services

Before you sign on the dotted line, it’s always a good idea to have a franchise attorney look over your documents. You don’t want to get yourself into a contract that binds you to more than you realize. You might also want a tax accountant on board to help you with your first hires.

Professional services are smart to have but they can add to the franchise cost.

#5. Payroll

Unless you’ll be working alone, you will need to hire a few people to help before you launch your franchise. This means getting new employees on the payroll.

Hourly wages add up fast. Make sure to calculate these necessary expenses when determining your budget for the franchise.

Getting Started

There are a handful of costs associated with starting a franchise, but there are also many opportunities to turn a healthy profit. Consider the financial commitment before you sign a contract so you can be sure you have enough budgeted to make a strong start.

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