Franchise Basics: How Much Does A Franchise Cost?

April 24, 2020

, by

Joseph Sexton

How Much Does Franchise Cost

How Much Will I Need To Invest In A Franchise?

When you google the cost of a franchise, oftentimes what pops up is simply the franchise fee, which can range anywhere from $1,000 to $80,000 or more. However, that’s just the fee to be a part of the franchise system.

The total cost of a franchise, and therefore what you’ll need to invest, includes many other expenses. These expenses are listed in a chart (Item 7) of a brand’s Franchise Disclosure Document, but you can usually find them online as well if you look hard enough or buy them from FranchiseHelp.

Read: What is a Franchise Disclosure Document?

Let’s take a look at some of the most common expenses you’ll need to account for:

Buildout/Construction Costs (Also Known As Leasehold Improvements)

If you’re building a restaurant with a full kitchen, you’ll spend quite a bit more on construction than you would for a tutoring franchise which may just be some paint on the walls, flooring, HVAC, and restrooms. Furthermore, if you’re taking over a space that already has some of those elements in place (like restrooms already built), then you’ll have some cost savings. 

Square footage is also a factor for what your investment in construction will cost. If you open a 3,000 square foot location instead of a 1,500 square foot location, it might not cost exactly twice as much, but it will be significantly more. 

This is why franchisors often provide an estimated range for this expense. It may say something like $80,000 - $150,000 for Leasehold Improvements. Shouldn’t they have a closer estimate? Well, they don’t know where you’ll be opening yet and neither do you, so it’s impossible to tighten up that estimated range until you know the square footage and existing condition of the space. 

Furniture, Fixtures, and Equipment

Again, until you know how big your space is and an architect has done a design layout, you won’t know exactly how many light fixtures, tables and chairs, etc you’ll need in your space. This expense is estimated as a range just like the construction estimate. 

Professional Services

Most franchises estimate somewhere between $3,000 to $5,000 that you’ll spend to have an attorney review your franchise agreement or advice you’ll see from other advisors like your accountant. 
Training

Sometimes there’s an actual fee associated with training, but if it’s already included in the franchise fee itself, then you’ll simply need to allocate investment dollars for travel and living expenses while you train for the franchise. Depending on the length of training and the particular city it may be hosted, it can range between $500 to $5,000.

As you can see, there are many additional expenses to factor into your franchise investment. In a brand’s FDD, you’ll find all of the detail you need to fully understand your investment.

Items 5 and 6 will cover expenses paid to the Franchisor, and Items 7 and 8 covers the Initial Investment and the suppliers you must use (Franchises typically restrict the suppliers from which you purchase your business equipment / supplies). It is important to note that the initial investment in Item 7 may not cover all expenses necessary to get your business up and running, but should act as a pretty realistic guide. Many business models run at a loss for months if not years before they begin earning, and you do not want to run out of capital as a franchisee, so you’ll want to make sure you have some additional funds set aside for any unexpected expenses. 

<< Back to Franchise News

Other Articles

Fast Growing Pet Franchise Denver 2022

Fast Growing Dog Daycare Franchise Secures First Location in Denver

September 20, 2022
Read Article
Veterinary Franchise

PetWellClinic Franchise Signs 3 Unit Deal To Provide Pet Care in NorthEast Massachusetts

June 21, 2022
Read Article
Dog daycare franchise

Dogdrop Franchise Inks 5 Unit Deal in Denver Colorado

June 9, 2022
Read Article
Pet-Care Franchise

Fast Growing Pet-Care Franchise Expands To Salt Lake City

March 29, 2022
Read Article
emerging petcare franchise

PetWellClinic Expands To Philadelphia Area with Goldfish Swimschool Franchisees

February 11, 2022
Read Article
Fast growing pet care franchise

Fast Growing PetCare Franchise PetWellClinic Surpasses 100 Units In Development

January 11, 2022
Read Article
fast growing petcare franchise

Walk-In Veterinary Franchise PetWellClinic Expands to New Orleans

December 8, 2021
Read Article
Pet Care Franchise Expands To Phoenix

Fast Growing Petcare Franchise PetWellClinic Heads To Phoenix

November 29, 2021
Read Article
PetCare Franchise

Modern Veterinary Franchise Expands to Southern Orange County

November 10, 2021
Read Article
start a franchise right now

The History of The Word Franchising (And How It Impacts Your Career Path)

November 1, 2021
Read Article
start a franchise right now

Openness and Optimism: Finding the Right Franchise

October 25, 2021
Read Article
Pet Franchise

How PetWellClinic Is Rethinking Modern Veterinary Care

October 19, 2021
Read Article