The UPS Store. McDonald’s. Chick-Fil-A. 7-Eleven.
These are recognizable brands, but have you ever wondered how much it costs to invest and own one of these businesses?
Franchising is a significant investment – both in time and money – and franchise costs can be a significant factor when finding the right franchise opportunity for you.
There is no one answer to this question since there are so many types of franchises.
Here’s a breakdown of high-end Franchise Fees from Entrepreneur’s Top 10 Franchise Brands:
- Taco Bell – $3 million
- The UPS Store – $567,000
- Popeyes Louisiana Kitchen – $2.6 million
- Culvers – $5.4 million
- Kumon Math & Reading Centers – $157,000
- Jersey Mike’s Subs – $804,000
- Planet Fitness – $4.1 million
- 7-Eleven Inc – $1.2 million
- ServPro – $221,000
As you can see, there’s a big difference.
Getting Started
For example, a fast food restaurant like Taco Bell will require a much larger investment than a ServPro franchise, which provides cleaning and restoration services.
The amount of money you’ll need to start a franchise also depends on the franchisor’s requirements. Some franchisors may require that you have liquid assets of a certain amount or additional permits or licensing for your storefront.
For example, The UPS Store requires prospective franchisees to have at least $75,000 in liquid assets.
A general rule of thumb is that you will need to invest anywhere from $30,000 to $250,000 depending on the type of franchise you choose.
Location, Location, Location
We cannot emphasize enough how much of a factor location plays for an investor in a franchise business.
Identical businesses can increase or decrease in value due to location.
An Ace Hardware store may be great in a place like Iowa but can the same be said for a Smoothie King?
Of course not.
In the business, they separate “Traditional Locations” vs. “Non-Traditional Locations”.
Traditional Locations are the full expression of the brand, including stand-alone stores and strip mall storefronts.
Non-Traditional Locations are places that are unique but have a captured audience that aligns with your franchise. This could be near a hospital, college, military base or another demographic unique to your franchise.
The moral of the story is that you need to do your research and make sure you are investing in a franchise that will thrive in the location you choose.
Ongoing Costs & Financing
In addition to the initial investment, there are also ongoing costs associated with owning a franchise. These costs can include marketing, procurement, training, and many others.
Additionally, it’s important to note that you will also need to have some money saved up for ongoing operating costs such as marketing, payroll, and supplies.
To avoid being surprised by hidden costs we recommend reading the Franchise Disclosure Document for any franchise you are interested in.
Franchisors are required by law to disclose ongoing fees in the Franchise Disclosure Document, so don’t forget to focus on the details.
If you’re an investor looking to get into the franchise space, you may want to borrow money to make your dream happen.
It’s important to do your due diligence on different lending options. Ground level relationships can get you in the door with specialty financers and commercial bankers.
Make sure the franchise you’re interested in has a good track record, is in an industry that you understand, working with people you trust.
Bottom Line
If you’re interested in learning more about how we can help you invest for your future, schedule a time to meet with Tuttle Ventures and we can find lenders that offer to finance your franchise.
Don’t forget: the amount of money you’ll need to start a franchise depends on the type of franchise, the franchisor’s requirements, and the location you choose.
Good luck and happy investing.