A franchise is a privately owned business that includes the name, branding, signage, and ways of doing business of the franchisor, an older and more established company. Examples of franchise operations that everyone knows include Wendy’s, Dunkin’, Ace Hardware, The UPS Store, and Anytime Fitness.
The advantages of owning a franchise, also known as becoming a franchisee, are that you gain instant brand recognition and the training and support of a presumably successful company — all while being your own boss since the company is yours.
But all of these advantages don’t come without a cost.
So How Much Does It Cost to Buy a Franchise?
A few thousand dollars — or multiple millions.
Yes, that’s quite a spread, but the franchise cost breakdown is based on numerous factors. These include the size and complexity of the business operation, your startup needs, and the reputation and ability of the franchisor to gain you instant acceptance in your field.
In truth, there are multiple types of expenses to consider, including the following one-time and ongoing franchise costs.
Franchise Fee
This is your most basic cost to own a franchise. You must pay it in order to gain the right to call yourself Wendy’s, Holiday Inn, or Jeannie Cleaning. For this fee, you get the name, logo, signage, and all of the training and support so your customers will recognize you as representing the same company they might have happily patronized in another city, state, or even country.
Franchise fees can cost anywhere from less than $10,000 to well over $1 million. It’s critical that you gain this information first so you don’t waste your time investigating a franchise operation you’ll never be able to buy because the cost is out of reach.
Royalty Payments
Your franchisor takes the attitude — and it’s realistic — that the reason you’re able to sell all of those hamburgers, gym sessions, insurance policies, or house cleaning services is because of the prior success they’ve had with those same products or services. It’s because of the franchisor that you have a built-in audience ready to buy from you the moment you put your ‘Open’ sign on the door.
For that reason, your franchisor wants and deserves a cut of the sales you make. Your royalty payments can be settled in a number of previously agreed-upon ways. It might be a flat fee paid upfront and based on an expectation of future sales. Or you might be charged monthly or quarterly, as a percentage of profits or gross revenue actually attained.
However, how your royalties will be tallied and charged is a subject that should be fully explained before you commit to a relationship, and laid out in writing.
Associated Startup and Operational Costs
This is basically the cost of starting your business and keeping it running until you achieve profitability, at which point your revenue stream will keep you going.
How much are these costs of owning a franchise? Once again, they’re in the thousands — or the millions.
Businesses with a large footprint might cost millions upfront. If you must buy real estate and build a physical location or build out an existing space to make it reflect your brand, the expense will add up quickly. If you own a franchise hotel, restaurant, mall store, or other high-end operation, you’ll need startup funding or investors to handle the hiring and training of a staff of 50 or 100 and the acquisition of a full inventory or products and perhaps hundreds of thousands of dollars worth of special machinery, equipment, or gear.
Are you prepared for those kinds of cash outlays? Do you have significant financial backing?
Some of the most reasonably priced operations are low employee count businesses. Think about a franchisee who owns a house cleaning or commercial window washing service. They might have some basic equipment, gear, or supplies, but they can operate out of their home or a van.
Similarly, someone who gets into the insurance field as an agent, analyst, or entrepreneur can run their business out of their own home. Once trained, their initial startup costs might not be much more than a website, business cards, laptop, and phone. They can handle the work as a solo venture, or at least until they become successful enough to hire employees and move to an office complex.
Get It in Writing
As you can plainly see from what you’ve just read, the average cost of a franchise operation is all over the map. Businesses that you can run by yourself — at least initially — and which don’t need inventory or a brick-and-mortar location are likely to be your most manageable ownership option.
Discuss all your startup and operational costs with the representative of any franchisor for which you develop an interest. Make sure that all financial expectations are clearly laid out in the brand’s franchise disclosure document, or FDD.
Before signing anything, take your FDD to your accountant and lawyer, your final assurance that no legal or financial issues raise alarms. If your experts do have issues with the agreement, see if you can get them changed. If not, don’t be afraid to walk away and find another franchisor.
Reach Out to Freeway Insurance, a Valuable Franchisor With a Reasonable Cost of Entry
You don’t have virtually unlimited funding. Few of us do. But that won’t upset your plans of buying a franchise and becoming your own boss with a highly respected brand and operation behind you.
At Freeway Insurance, we’ll show you, step by step, how to succeed as an independent insurance agent with your own agency and the Freeway brand behind you. You’ll get our top-tier industry training, the insurance agent education requirements you need, and the guidance, support, and instant brand recognition through one of the largest and most reputable personal lines in the United States.
We’ll even help you get the state certifications you’ll need and teach you how to build a financially rewarding insurance franchise with the competitive advantages of our name and the relationships we’ve established with major carriers.
The entry cost is low, and we have franchise opportunities all across the country.
So, let’s start the conversation.
Reach out to Freeway Insurance by contacting us online or calling (877) 822-3024 to speak to a franchise representative today.
