How much does a franchise cost?

Home-based franchises and personal services tend to have lower associated costs than those that require equipment, a premise or a fleet of service vehicles, so it’s key when investing in a new franchise opportunity that you are aware of the initial costs, what is included and all ongoing expenses incurred when running a successful business.

The upfront cost of a franchise will include the licence fee and an opening support package – also referred to as franchise fees.

The license fee gives you the right to use the brand name and registered trademark, usually within an exclusive territory, and to use the Franchisor’s business systems, processes and procedures in order to operate your franchise. The franchise fees will include items such as your initial training and local marketing support when you launch – items covered by the franchise fees will vary from franchise to franchise. 

There will be other costs associated with setting up your franchise business such as legal and accountancy fees, working capital, company insurance etc. and these should all be considered. Your Franchisor should provide you with a detailed estimate of what these are likely to be for their particular opportunity.

With most franchises there will be a continuing fee, usually paid on a monthly basis to the Franchisor, which is called a Management Service Fee. This fee can either be a percentage of turnover or a fixed rate. Some franchises may also apply additional ongoing fees for national marketing, software licenses etc. This is some of the information you should be armed with before making your decision on whether to purchase a franchise.

Franchises rarely fail as you are removing the risks typically associated with opening a brand-new business, in fact 97% of all franchise businesses are turning a profit. You benefit from the franchiser’s recognisable brand whilst essentially managing your own operation and having the support and materials you need to run a successful business. For larger initial investment franchise opportunities, you will generally reap greater rewards and receive higher levels of ongoing support.

Overall, there are many different franchise opportunities on the market that will all come with different support packages and varying initial and ongoing costs. It’s important to remember when investing in a new franchise business that it should be something you enjoy and that it feels right for you – you must have a passion for the business or you will resent putting the necessary hours in to succeed. As they say, “you get out what you put in”!