How Much Does it Cost to Start a Franchise Restaurant?

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How Much Does it Cost to Start a Franchise Restaurant?

It’s the question on everyone’s mind. The first and biggest question they ask when considering starting a franchise. How much is it going to set them back? Can they afford it? And more specifically, what exact numbers are they looking at. A question (or series of questions) that come with good reason. Without the ability to afford a a new business, even the most prepared person won’t be able to take beginning steps toward their own food franchise.

So … how much does it cost, really? Depends on the company. As well as the location. Each restaurant will charge a different amount, based on fees and income (of established branches) or the projected income (of to-be-built branches). The latter of which, however, comes in the form of local property prices.

To find this number, look at the franchise company’s brochure page on FoodFranchise.com.    Most franchises supply the minimum capital required which will tell you how much upfront cash investment is needed.  Then once you have a figure in mind you’ll be better able to plan for the future. Whether than means signing on with a company, or finding one that’s more budget friendly.

Generally, a company charges a certain amount for licensing of their brand – in the multiple thousand range – anywhere from $10,000 and up. And while that might sound expensive, consider what you’re paying for. If starting from scratch, there’s far more work to be done. No one knows your food (which you have to establish and find recipes for), they don’t know your name, and you have to create your own flow of work, prices, marketing, business plan, payment and tax structure, etc. Essentially, you’re starting from square one if you go it alone without the backing of a proven franchise model.

Which is why the fee is often gladly paid by franchisees – it allows them to start running, rather than figuring everything out the hard way. But most importantly, it puts you on the map. Gives you the ability to sell a brand that everyone knows, many love, and are willing to go out of their way to get.

Breaking Down the Fees

Most franchise companies will be able to lay out your pricing structure when signing on. They’ll know how much you’ll spend on employees, overhead, etc. Which is why they’re most valuable asset when creating a realist budget.

It’s also a good idea to have extra funds on hand, just in case. When coming up with a number, experienced restaurant owners tell us it’s always better to have more than enough than “just” enough. You never know what will pop up or when, and stretching yourself too thin can create ongoing issues before you’re able to turn a profit.

Before starting a franchise, remember to crunch the numbers and account for any outside expenses. By understanding these numbers up front you can create a realistic account of where your money’s going, and just how quickly it’ll be coming back in.

We wish you all the best and remember the old adage – “measure twice, and cut once!”.  

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By Jason Hightower | August 28, 2015 | Food Franchise Blog