Owning a franchise is a great opportunity for those who wish to have more of an entrepreneurial role in the industry. Below are a few of the major costs to research if you plan on opening your own franchise.
Initial Franchising Fees
Most franchisors will require you to pay in order to become a franchisee in the first place. The fee can cover the name of the franchise itself, as well as certain introductory training expenses and recruiting costs. On average, you can expect to see an initial franchising fee of $20,000–$30,000, but it can range anywhere from $10,000 to over $100,000.
Royalties/Ongoing Franchise Fees
Franchisees will often pay a certain percentage of the gross revenue earned from their business. The average royalty is around 5 to 6 percent of that volume, but it can range from only 1 percent to more than 50 percent. However, this fee isn’t always revenue-dependent — it can also come as a fixed periodic amount.
A marketing fee encompasses all types of advertising and other marketing methods for the franchise. Certain packages offer participants features such as greater online visibility, advertising billboard campaigns and other promotional materials. A marketing fee typically falls with 1 to 4 percent of the gross revenue, though it may be a fixed contribution as well.
Office Fees, Inventory and Supplies
This fee will include any type of required daily office supplies and the cost of the actual office space. Some supplies will automatically be required by the company, but an office fee can include a variety of different packages or materials outside of that spectrum.
A franchisee must usually pay a fee for the training of each new employee hired in the new location. The cost will depend on the size of the franchise and the amount of workers hired when the business actually opens.
Required Purchases of Products or Services
Franchise companies often require a franchisee to purchase certain products or services to ensure the continuation of safety and customer satisfaction in the new business. A franchisee will have to purchase these either directly from the company or from another affiliated organization.
A franchise company may ask you to pay other fees related to your franchise as well — for example, utilities or additional education courses.