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By Christopher Freeburn


You have done your homework and decided that a buying a franchise is the best way to start your own business. You've researched the franchise industry, decided what type of franchise best fits you and maybe even narrowed down your list of potential franchises to a handful, or perhaps even just one. Now you want to know: how much will this all cost?

Answering this question depends on two issues. First, which franchise you choose; and, second, the material costs of getting started.

Paying to join the team
If you plan to open a popular franchise retail store, restaurant or coffee shop, you are looking at considerable initial costs in addition to whatever franchise fee the franchisor charges. The franchise fee is the upfront investment in the franchise. Fees vary from as little as $2,500 to more than $50,000. The franchise fee gives you the use of the franchise name and products or services. While that may sound low, the franchise fee is almost incidental when factoring in all of the other costs associated with opening a franchise.

In addition to the franchise fee, most franchisors demand a percentage of your profits assessed on a periodic (usually monthly) basis. This is the royalty fee for using the franchise name. Domino's Pizza, for instance, charges its franchisees a royalty fee of 5.5 percent of weekly sales in addition to the initial $25,000 external franchise fee, and requires additional fees from franchisors for its regional advertising campaigns. In exchange for these fees, and depending on the franchise, you will receive access to marketing and training materials, the right to operate your franchise in a specified geographic location (without competition from other franchisees), training and other support from the franchisor.

The real bottom line
Beyond the franchise fee, there are other costs, including supplies, space to run the business and marketing expenses that will be required to get the franchise up and running. These expenses will vary among franchise options. For example, estimates that the total initial investment needed to start a Domino's ranges from $120,000 to $461,700, depending on the site. Of course, some franchise operations can be run from your home, in which case there will be no need to purchase or rent a location. Others require a simple storefront. Some others require a considerable investment in location, including internal décor, lighting, equipment and furnishings according to franchise specifications.

Some franchisors will help you find a location for the business; others expect you to do that on your own. In either case, you will be expected to pay for the rental or purchase of the location. Some franchisors will help you find financing, if you qualify; most won't. Be warned, some franchisors are very exacting about the appearance of their franchise locations and will demand to inspect and approve your choice of storefronts before finalizing the agreement.

Finally, there will be the cost of acquiring any products or equipment associated with your franchise's operation. This can become quite expensive, depending on the franchise. When considering which franchise opportunity to explore, all of these costs must be taken into consideration.


For example, some online franchise directories estimate that to open a Desert Sun tanning franchise, in addition to the $50,000 franchise fee, a franchisee can expect to spend between $200,000 to $427,000 to acquire the needed tanning beds, UV-Spray booths, neon signage, marketing materials, satellite music, lotion, insurance, and cleaning equipment, required to open a Desert Sun Tanning Salon. For The Athlete's Foot, a popular sports shoe vendor, total start-up cost estimates range between $200,000 and $640,000, inclusive of storefront, supplies and equipment costs.

Similarly, opening a Ben & Jerry's Scoop Shop franchise could cost somewhere between $200,000 and $385,000, depending on the region of the country, once costs plus their $32,000 franchise fee are counted.

Does your financial portfolio measure up?
The cost of opening a store is so great that many franchisors set specific financial requirements that would-be franchisees must meet just to be considered for a franchise agreement. Ice Cream giant Carvel charges a $30,000 franchise fee to open a full Carvel store, but the costs of purchasing the property and equipment are such that, according to its company website, Carvel will only consider franchisees who can demonstrate a net worth of at least $300,000, with at least a third of that available as liquid cash. The greater the cost of starting up a franchise, the higher the financial requirements will be. Bally Total Fitness states on its website that it will only consider franchisees with at least a combined $800,000 in assets; the International House of Pancakes (IHOP) similarly demands a minimum combined net worth of $1.5 million and $500,000 in liquid assets.

There are, however, less expensive franchises out there. Jackson Hewitt Tax Service franchises can be established for between roughly $50,000 and $85,000, including fees. Rival Liberty Tax Service franchises cost even less, with start-up expense estimated at $56,000 to $70,000. RE/MAX real estate franchises run between $35,000 and $200,000, depending on how you operate the franchise. JAN-PRO commercial cleaning franchises cost a remarkably low $5,000 to $50,000 to start, again depending on the extent of operation. With more than 2,300 franchises available in the U.S., there are a wide variety of franchise opportunities at almost every level of financial investment.

(To find out more about the initial fees, royalty sales percentages, and estimated start-up costs involved with the major franchises listed in this article as well as hundreds of others, check out the individual company websites as well as online franchise directories like and



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