How Much Does a Franchise Cost

Franchise Ownership

Franchises are a great way to break into the world of small businesses, but you probably won't get off cheap. The cost of franchises vary depending on the product and the amount of national or international business it does, and there are other costs involved, such as royalty fees, supplier cost etc.

You can expect to pay an upfront franchise fee which is generally rather substantial. It can range from $5,000 to $50,000 or more. For this money you will receive the right to use the franchisor's name and business concept and in many cases, you will receive a certain amount of training from the franchisor.

McDonald's Franchise

McDonald's for example will put you through a grueling nine-month long training in their way of doing business, their standards and formulas. The McDonald franchise however is very expensive and will cost you an initial franchise fee of about $45,000 in addition to at least $175,000 of non-borrowed up front money to open the restaurant. You will be responsible for suppliers and putting in the stove, counter, sinks and coolers for the kitchen.

In addition to the fees, you will need to pay ongoing royalty fees. This is a fee that is assessed on a percentage basis and generally ranges around 5% or 10% of you profits. In return, you will receive the benefits associated with the franchise marketing campaigns, ongoing training and territory rights. So, it can be a win-win situation.

Real Estate Cost

Like in most business, you will need to buy or rent space for the franchise. It is not the responsibility of the franchisor to provide you with a space for your business, but you may be restricted to locations. They will often assist you in finding a place that is right for both you and the franchisor.

Inventory and Equipment

Again, just like in any business, inventory and equipment are going to be your responsibility to obtain. You may buy your equipment and supplies from the franchisor or from suppliers contracted through the franchisor often at a reduced cost and an asset because it provides a reliable supply chain. Still, you are going to foot the bill.

Other Costs

You will of course pay the normal operating costs like payroll, supplies and utilities, but other costs could include advertising although some franchisors will include this in their royalty fees. If you own a food franchise, you will be responsible in keeping it within health codes and endure the cost of exterminating vermin if needed.