Must Know Franchise Costs To Guarantee A Profitable Investment


Franchises are smart, safe and, if done correctly, hugely profitable investments. They can be a life changing experience, providing you with the opportunity of being in a business of your own. However, franchise costs require careful consideration when buying a franchise, regardless of whether it is Papa John’s franchise or a carpet cleaning franchise. To be profitable, business owners need to build upon a stable brand name without over-burdening franchise costs. Here, we look into franchise cost options that you can start with minimal investment.

Home Based Franchises

Low cost franchises usually tend to be home-based business opportunities. Home based business lower overhead costs like rent and utilities. Secondly, home based franchises offer greater flexibility as far as hosted VoIP solutions and business processes are concerned, potentially increasing your overall productivity. As a result of the lower set up costs and increased flexibility, the a low cost franchise can be highly profitable too.

There are several low cost franchise business opportunities that operate from home. The present market shows great opportunity for in-home senior care, travel agency and tutoring franchises. While home based franchise costs can be as low as $10,495 for a cruise planning business, business owners can purchase a Acti Care senior care franchise for $52,000. Of course, many low cost franchises fall in between.

Financing Franchise Cost of Start Up

Low franchise cost business are not all home-based. Many companies offer lower franchise costs by using financing options when they are looking for investors, greatly reducing your initial start up franchise cost. For example, Snap Fitness, a gym franchise, has an estimated start up cost of just $75000. To break out into the fitness industry, many would consider this a high franchise cost. To lower the costs, Snap Fitness offers financing options to the potential franchise owner. Depending on your franchise of interest, you can finance your franchise, creating options for more business opportunities.

Franchise Royalty Costs

In addition to start up costs, franchise companies charge royalties. In return for their brand and ongoing support, the franchisers charge a fee, in the form of a royalty, throughout your business tenure. Royalty fees vary between sectors. For example, automotive franchises demand an average of 7% royalties while full-time restaurants charge around 4.47% royalties. Of course, a decent royalty fee should be highly prioritized when choosing a franchise.

Estimated Initial Investment

All Franchise Disclosure Documents include an estimated initial investment figure. This is a number you should pay attention to if your primary concern is franchise costs above all else. This number is not exact, that is why it is called estimated, similar to Amazon repricing software. However, this number will also help give you an idea of the total costs you will incur if you open the franchise. This includes more than just the franchise fee. It also accounts for additional costs, like real estate, equipment, supplies, business licenses costs and even working capital requirements. Pay attention to this number if you want to make sure you can afford the franchise you are about to become a franchisee for.

Upfront Franchise Costs

To open up a more popular franchise, you could end up paying a very high initial investment. To secure a franchise like McDonalds, Taco Bell or KFC, you may spend over $1 million dollars in upfront franchise costs. This is a very good reason that many franchise companies will require that you have a net worth of over $750,000-$1,500,000 or more. Additionally, you should have liquid assets in excess of $350,000 but as much as $750,000. For the small business owner looking to invest, this can be a touch level to reach.

Finally, franchise costs include more than the initial investment and royalty fees. When planning to purchase a franchise like Starbucks franchise, the costs should also include operational costs like employees, equipment, rent and more. These are all required to operate your business and may not be included by the franchising company. However, most companies will provide an estimate of the additional costs to the franchise owner. Of course, nobody wants to be surprised with hidden costs and it is best to do your research carefully.

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