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How Much Does a Franchise Cost?
Currently contemplating whether to start a franchise? One of the questions swirling around your head right now has to be: how much does a franchise cost in the United States, and is it expensive?
This is a little hard for us to answer, primarily because so many factors will determine how much you end up paying. To clear up the confusion, this quick article tells you what prices to expect, typical investment ranges, and what influences franchise costs nowadays. You can then make smarter financial decisions about your possible new venture.
Franchise Costs Explained
Before diving into specific numbers, let’s explain how franchise cost models in the U.S. actually work in practice.
Say you plan to open a new location for a big-name brand. The total cost for doing so will typically include the following components:
- The franchise fee is the initial cost for starting your small business. You pay it to the franchisor (the company that owns the brand) for the right to use their name, systems, training, and ongoing support.
- You’ll likely have startup costs with a franchise. Expect to pay for a storefront, equipment, inventory, signage, and more. (Some franchise opportunities, like WIN Home Inspection, don’t require inventory or a physical location, reducing your overheads.)
- As a franchisee, you’ll give back a small portion of your earnings to the franchisor, usually every month (known as royalties). This gives you access to ongoing support, coaching, proven systems from a trusted brand, etc.
- Sometimes a franchisor pays to spread the word about your new location to potential customers; other times, you’ll need to foot marketing fees yourself.
- Set aside money for additional expenses, such as insurance, training team members, accounting fees, software costs, and permits.
What Determines Franchise Costs?
It really depends. Some of the factors that influence the total include:
- The type of industry you’re in
- Your location
- Whether that location requires renovations, specialized equipment, and other setup costs
- The franchisor’s specific business model
- The size of the franchise, with larger ones usually involving higher costs
- Brand recognition, with more famous companies typically charging higher fees
How Much to Start a Franchise
When weighing up franchise starting costs, there are two important numbers to consider:
- We mentioned this earlier, but paying the franchise fee is one of the most critical elements of starting a new franchise. So, how much is the initial average franchise fee? According to the International Franchise Association, the typical range is $20,000 to $50,000. However, the exact amount you’ll pay depends on your franchise type and other factors.
- Your total investment cost includes the franchise fee above and all the other expenses you’ll have to pay to get your business running and keep it operating for years to come. It includes things like royalties, equipment, licenses, vehicles, and so on. Typically, most investments range from $100,000 to $300,000, says the Franchise Business Review. However, some franchises can cost as little as $10,000 to $20,000. Home-based businesses, for example, might have lower upfront and running costs than brick-and-mortar storefronts.
Don’t Forget About Working Capital
The expenses above are pretty easy to plan for. Take your franchise fee and royalties, for example. You’ll know exactly what these are before you agree to open a business and sign on the dotted line. If these costs are too expensive, you can always go with a different franchisor that better fits your budget.
Working capital is a little harder to predict when determining how much a franchise is worth. This refers to all the cash you’ll need to cover expenses that crop up when running your franchise, such as maintenance, repairs, and unexpected bills. For instance, you may need to pay out when a piece of equipment breaks down or quickly adjust your budget if utility prices increase.
Day-to-day costs can fluctuate, and emergencies can happen, so it’s essential to have a financial cushion to cover every scenario. Consider setting aside a certain amount of revenue for regular operating expenses as well as unplanned situations.
Franchise Costs Don’t Have to Be Stressful
Working with the right brand makes franchise expenses much more predictable, with established companies like WIN Home Inspection offering clear fee structures and no hidden costs. WIN provides home inspection services for buyers, sellers, and real estate agents, helping them identify issues with homes before a sale.
What makes the WIN nationwide franchise model so successful? Well, you can do nearly everything from your own home, meaning you don’t need a storefront, previous experience, or a lot of team members to get started. As a strategic partner, you’ll also benefit from the extensive in-house training, marketing, and support that WIN provides. Plus, our low startup cost makes us the most affordable, in-demand investments in the home services industry right now.
Learn more about how to own a WIN Home Inspection franchise by scheduling a free consultation with a franchise expert.
The Real Cost of Franchising
Getting a definitive answer to the question, “How much does a franchise cost in the U.S.?” is pretty much impossible. Here’s why. When you open a new business as a franchisee, the price you end up paying depends on various factors, such as your industry, location, everyday costs, and the franchisor’s particular business model.
Some franchises have minimal setup costs, while others can cost hundreds of thousands of dollars when all’s said and done. By considering all potential expenses, you can make the right decision about what franchise is best for you and your family.
