Cost to Buy a Franchise
As an entrepreneur, you are always looking for new ways to grow and succeed. One of those ways is by becoming a franchisee. You might be asking the question- How much does it cost to buy a franchise?
Why consider a franchise? Because you greatly reduce your risk in becoming a business owner.
When thinking about business ownership, you may have asked yourself,
“How much does it cost to buy a franchise?”
Answering the first question depends on several factors, including the timeframe in which you want to become successful, the assets you have to put toward a business, and your ability to take a concept that already working and make it your own.
Check out our previous article, “Top 5 attributes of a franchisee,” to see if franchise ownership might be a fit for you.
The answer to the second question is a little more complex. Let’s dive in, shall we?
As a potential franchisee, you now have the opportunity to run a successfully established business and grow your experience as a business owner and entrepreneur. But before you start on this new journey, it’s essential to know all of the costs that will incur when buying a franchise, so keep reading and for some helpful insight!
Initial Costs to Buy a Franchise
When buying a franchise, there is always an initial cost to own the business. There is no “one-price-fits-all” when purchasing a franchise and can range from 10,000 to a few million dollars.
The most expensive franchises include:
- McDonald’s
- Sonic
- Planet Fitness
- Dunkin Donuts
- Taco Bell
Hotels and full-service restaurants are also among the most expensive because of how much they cost to start up and get going.
The less expensive franchises include travel (dream vacations), business coaching, exercise, and cleaning businesses.
There are also very low end options such as kiosks, vending machines and recycle drop off stations – both lower end investments worth looking into.
Franchise Fee
This is the fee to license the business and use its name, trademarks, business practices, proprietary marketing systems and more. The reason for this fee is that there is already a proven system in place that makes money. You don’t have to figure the business model out through trial and error.
In short, franchise fees can range from a few thousand to several million dollars to get started.
Initial Investment
There is a difference between initial investment and franchise fees. The initial investment includes training, start-up costs, insurance, certifications, inventory, equipment, furniture, and other expenses necessary to start and operate the franchise. Get clear on your costs, and if you have any trouble identifying what’s what, reach out to me.
Recurring Fees
Once you have your business up and running, you will be paying a royalty fee which is a percentage of the profits paid to the franchisor.
Depending on the agreement, you will also be paying for marketing, equipment maintenance and repair, insurance, rent, inventory, employee costs, and more.
Franchise Disclosure Document
If all of this information about fees and costs to start a franchise seems daunting, check out this Franchise Disclosure Document (FDD). This will lay it all out for you. Once you decide what kind of franchise you want to run (Hotel, fast food, restaurant, service, retail, etc.), you can then inquire about the FDD for a particular franchise.
The information will be presented to you in an organized and understandable manner that allows you to figure out what is needed to run that particular franchise.
Every franchise is different, so it’s best to research and speak to professional consulting companies (like us!) to guide you in the right direction.
Work with MVision
Here at MVision Franchising, we want to help our clients succeed. But, unfortunately, all of the information about franchising, costs and fees, and royalties can make you feel overwhelmed from the start. That is where we come in. We have a Funding Calculator that considers costs of all of your assets, liabilities, credit score, and more and gives you helpful insight into funding your dream.
We can help determine which franchise is best for you based on your budget, location, experience, interests, and goals. This service is priceless for those looking to expand their expertise and start a new journey. Let us be your guide and get you one step closer to becoming a Franchisee!