Guide

What does a franchise really cost?

The sticker price of a franchise is the franchise fee, but that is rarely the number that matters. The number that matters is total initial investment, which the franchisor discloses in Item 7 of the Franchise Disclosure Document. It bundles the franchise fee with everything you need to open the doors.

The pieces of total investment

Item 7 typically includes the initial franchise fee, real estate or build-out, equipment and signage, initial inventory, training and travel, licenses and permits, insurance, and several months of working capital. Two brands with the same franchise fee can have wildly different total investments once real estate and equipment are added.

Franchise fee versus total investment

A $45,000 franchise fee can sit inside a $250,000 total investment. When you compare opportunities, compare the total ranges, not the fees. You can see both for thousands of brands in the FDD database.

Ongoing costs

On top of the upfront number, expect ongoing royalty fees and an advertising or brand fund fee, usually expressed as a percentage of revenue. Those determine your real take-home, so weigh them alongside the investment.

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