In 2018, there were about 758,000 franchises in the United States.
If you’re interested in owning a franchise, you’ll have to pay a franchise fee along with other types of expenses to keep your business running.
If you’re interested in what other fees you’ll have to pay and budget for, make sure that you keep reading!
Franchise Fee
On average, franchise fees can be anywhere from $20,000 to $50,000, and it’s a one-time payment. However, some franchises have fees that are less than $20,000, although these are normally based at home or online.
This fee will cover the cost of any training needed for employees, support, and money to select the site of the franchise.
When you have to pay the fee can vary. In some cases, it can be an upfront fee that will let you use the franchising name. Before you sign any contracts, make sure that you understand when you need to pay this.
Royalty Fee
On top of the fee to use the franchise, you’ll also have to pay royalty fees each month. This is kind of like a membership fee that will help support the franchisor, which is often their main source of income.
They are often a percentage of your gross sales each month. Some companies set it to 5%, but some can also set it as high as 9%.
Some brands will also set a minimum dollar amount, so it could vary each month. This is why it’s important to make sure you have a percentage of money set aside so that you can meet that dollar amount each month.
Ongoing Expenses
As well as the two main fees for the franchisor, you’ll also have other expenses to keep your business running.
Some of these expenses include things like paying your employees and buying supplies for your business.
Payroll
If you buy a franchise that needs employees, you’ll have to pay for payroll expenses and pay their salary.
You should have a conversation with the franchisor to estimate how many employees you’ll need. As an employer, you’ll also have some extra fees to pay.
Utilities and Rent
Unless your franchise is online, you’ll also have to rent a commercial space to run your business.
This means that you’ll also have a monthly payment for rent and all the utilities there. If your business is somewhere with seasons, you’ll likely have a differing utility bill each month, but you should budget for a higher cost just in case.
Marketing
Lastly, you’ll also have to save money to get your franchise out there.
For some franchises, they’ll give you some pre-made advertising materials, but none of these are free. And you’ll also have to pay to advertise your business locally to generate sales.
Learn More About Your Franchise Fee
The franchise fee is only one of the expenses of franchising, but there are many more to consider.
If you think you can handle all of these, you should check out our franchise; we’d be happy to partner with you! In order to see if we’d be a good match, make sure that you request a quote from us today.
