Long before someone gets serious about researching franchise ownership they will likely be asking these questions: How much does a franchise cost and how much will I need to invest?
It is important to understand how and why the answers to these questions differ.
The ‘cost’ of a franchise is the franchise fee for each unit or territory you purchase from the franchise company. This is a fixed number that is the same for every applicant. This fee is paid at the time you sign the franchise agreement. Think of this as the down-payment for the business you will be building. Most franchise fees are between 20k and 80k.
The “Estimated Initial Investment” is the amount you will need to invest to get your business open and operating. This includes the franchise fees and all other expenses related to preparing your business for launch and then operating the business for a period of several months. Franchise companies are required to provide you with a detailed list of anticipated expenditures during a specified time frame so that you will be financially prepared to invest as needed.
Lenders will look at this number when considering your qualifications for a loan to help with these initial expenses.
Fun Fact: When it comes to buying a franchise, there is no correlation between what you initially invest and your potential earnings. In other words, paying more does not necessarily equate to earning more!
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