Franchising Basics: The True Cost to Open a Franchise

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Opening a franchise can be a dream come true. Unfortunately, the cost can be astronomical as fees begin to accumulate. Keep in mind that there is not a set price on how much it costs to open up the business. It varies from one franchise to another. It depends on the location, number of workers, type of franchise, and much more.

At Rodney R. Hatter & Associates, we’re committed to making your franchising process an easy one by providing legal counsel and contract assistance for every stage of the process. If you’re interested in franchising, here’s a quick breakdown of the costs.

Related: What’s the difference between a Franchisor and a Franchisee

Legal and Accounting

Anyone who wants to buy a franchise should consult with a licensed franchise attorney. The attorney will review the franchise agreement and disclosure with you. There is not a set fee, but it’s definitely worth it to choose an experienced attorney. Do your research and check out your potential attorney’s portfolio to see who they’ve worked with. Allocating funds to legal counsel saves you from spending on improper filing and even lawsuits later down the line.

It’s best to keep a record so you can budget wisely. To keep track of expenses, seek help from a qualified accountant. The accountant can set up books and records to keep track of all the fees and costs to determine how much working capital you will need and how to budget.

Working Capital

Your working capital is the amount of cash available to your business. It depends on the type of business you have, but it’s vital to ensure that you have enough capital to cover trademark fees and other factors. Your working capital should include at least two or three months to as much as 2 to 3 years of the business’s potential spending. 

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Franchise Fee

There are a couple of fees to consider when opening up a franchise. The franchise fee can cost anywhere between $20,000 and $50,000. Some franchises might cost less than $20,000, but it depends on the type of franchise opportunities that you are looking for.

For example, mobile and home-based franchises tend to cost less. Franchise fees go towards training, and don’t include the typical travel fees associated. 

In some cases, you’ll need licensing fees for the right to use the name. Aside from the franchise fee, there are other fees to look at, such as the initial investment, uncle investment, and personal finances. 

The initial investment is your starting point. Essentially, it’s the amount of money that is required to cover labor, material, and resources that you will need to launch the franchise. 

The ongoing investment is the money that is required to run the franchise on an ongoing basis. Personal finance requires the owner to have a certain amount of net worth before they are eligible to get a particular franchise.

Built out cost

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Once you decide on the type of franchise and location you want, it’s time for the buildout costs. The buildout costs encompass the equipment, signage, and furniture. 

There are also other start-up costs to consider, which might include 

  • architectural drawing
  • Zoning compliance
  • Contractor fee
  • Security
  • Insurance
  • Landscaping
  • And much more.

If you decided to do a home franchise, then you will not need to consider these additional costs. Since a home-based and mobile-based franchise require fewer funds, they are more affordable than ones that require a new physical space.

Related: 10 Benefits of Owning a Restaurant Franchise 

Supplies

There are a lot of supplies that are required to open up a franchise. For example, a food franchise will need utensils, tables, cooking tools, and much more.

Other franchises might need office supplies or large amounts of other small products. It’s important to keep close track of internal business expenses to avoid overspending.

Inventories

If you’re considering a retail franchise where you are selling a particular type of product, then it’s vital to stock up on inventories.

Every franchise is different and requires  a different amount of starting products. You may have to purchase between $20,000-$150,000 worth of inventories to jumpstart and to ensure the franchise strives.

Travel Expenses

Sometimes, an employee or franchisee will need to attend a training course in another state or country. This will entail travel and living expenses.

Usually, the training itself is covered by the franchise fee, but not the travel expenses. The franchisee is responsible for living and training-related travel expenses.

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Sometimes, training can last for a few days to over two weeks. If the franchise has a complex system of doing things, then they require months of training. With that in mind, it’s imperative to factor these costs to determine the proper budget.

Find out which restaurant franchises chose Rodney R. Hatter & Associates for legal services.

Some Low Franchise Fees to Check out

Here are a few successful and low-cost franchises to consider:

1. Cruise Planner

For example, Cruise Planner has a franchise fee of $10,995. Their initial investment is $2095-$23,367. This is an amazing travel company that is a representative of American express. You can operate your own cruise planner franchise out of your own home with a more affordable initial investment.

2. Fit4Mom

Fit4Mom has a franchise fee of $5495 to $10,495. Their initial investment is about $6205-$24,285. One of the most common issues with mothers is that they don’t have time to work out and stay healthy. Fortunately, with Fit4Mom, it provides fitness instruction to conduct stroller stride classes, body back classes, fit for baby classes, and clubs to help the mother stay fit. 

3. Chem-Dry

The Chem-Dry franchise has a fee of around $23,500, personal finance of $50,000, and an initial investment of $56,495-$162,457. Chem-Dry has been a very successful franchise business. It was founded in 1977 to provide an excellent cleaning solution for carpet and home. 

4. Jazzercise

Source Alt Text: A Jazzercise dance class practices

The Jazzercise franchise has a fee of $1250 and an initial investment of $2500-$38,000. This fitness franchise was founded in 1969 and provides a fantastic dance workout that combines modernize and hip hop dance routine and exercise to the world. 

5. The Stratus Building

The Stratus Building Solution is another excellent franchise with an initial investment of $3450-$200,000, franchise fees of $2700 $200,000, and personal finance of $10,000. 

This franchise focuses on providing an environmentally friendly solution to replenish janitorial for a clean retail shopping center, restaurants, and office needs.

6. SuperGlass Windshield repair

The SuperGlass Windshield repair has an initial investment of $18,685 to $84,205, franchise fees of $5,000 to 17,500, and personal expenses $15,000. This franchise only requires a few weeks of training, and they provide excellent services in repairing the windshield.

7. The Mosquito Squad

The Mosquito Squad has a franchise fee of $15,000 to 32,500, and an initial investment of $17,050 to $79,025. Mosquitoes are everywhere, are annoying, and can be a health hazard. Fortunately, with Mosquito Squad, they can destroy these nasty critters that are dwelling in your backyard.

They were founded in 2009 and are known as the best pest control company nationwide. They have over 200 franchises and $50 million in sales. The significant part is that the franchise fee is pretty low, and they have a third-party lender relationship to support the financial sector of the business. 

8. The Pillar To Post Home Inspector

The Pillar To Post home inspector has an initial investment of $36,350 and franchise fees of $21,900. They have more than 500 franchises in the United States and Canada and provides an excellent opportunity for the first-time franchisee. This franchise is a home inspection company that has become the preferred company for several real estate partners. 

Find out more about franchises with Rodney R. Hatter & Associates approach to franchises.

9. Property Management Inc.

Source Alt Text: A one-story residential home is surrounded by greenery 

Property Management Inc. has a franchise fee of $15,000-$45,000 and an initial investment of $21,250 to $106,800. More than 35% of US residents prefer to rent a home rather than owning one. 

Because of this, there is a significant opportunity for the proper team management industry. The property management franchise offers training, marketing solutions, and technology to ensure the success of the company. 

10. Soccer Shots

Soccer Shots have an initial investment of $41,034-$53,950 and franchise fees of $34,500. Soccer shots involve providing fitness to the pediatric population. This franchise was founded in 2005 by two professional soccer players. 

The franchise has grown nationwide, with over 350,000 kids in the program. It continues to grow at a steady rate every year.

Conclusion

Owning a franchise is a business venture with high financial potential and the opportunity for personal growth, but it can be costly. There are a lot of factors to consider when calculating the cost of opening up a franchise business. 

Some financial factors include legal and accounting fees, working capital, franchise fee, buildout cost, inventory, supplies, and travel expenses. Together, these can add up to a significant amount. This is why it’s imperative to save the proper amount of money before venturing into this journey. 

Fortunately, some franchises have low fees and initial investment. If you want something more affordable, definitely try a homebase or mobile franchise business. 

With this in mind, we hope that the information we provided can give you a clear idea of how much it costs to start a franchise. Find out more about how our attorneys at Rodney R. Hatter & Associates can be of service to you.

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