Understanding Your Franchise Fee and Other Startup Franchise Costs
Thinking about entering the world of franchising? It is a great opportunity if you have aspirations of business ownership but don’t want to go it alone. Before you sign a franchise agreement, you will want to equip yourself with the knowledge about the financial requirements of your investment.
First and foremost is finding out, how much does a franchise cost? The franchise agreement you sign with the franchisor clearly outlines a comprehensive fee schedule that the franchisee pays to the franchisor, including amounts or percentages and the frequency of payments.
You’ll pay a franchise fee which is a one-time upfront payment paid to the franchisor when you sign the franchise agreement. This puts you in business and is the cost of entry. It gives you the rights to use the brand name, products, intellectual property and systems. Instead of creating a business from scratch, you benefit from the brand recognition and systems that the franchisor has already built. But these benefits come with a cost. For most franchises, the franchise fee is due in full when the franchise agreement is signed. Typically, franchise fees range from $10,000-$50,000 and in order to be recognized as a franchisee, there must be a minimum of $500 paid as a franchise fee. The price all depends on the industry, location and type of franchise.
But the franchise fee isn’t the only franchise cost. There are initial franchise start-up costs that will be the build-out of your franchise location, if applicable. This can sometimes include real estate, construction costs, equipment, inventory, licensing and permits. This is dependent on the type of franchise you will own and all fees vary by brand.
When opening a franchise location, franchisees will need to prepare to pay for startup costs, which can range from less than $10,000 to upwards of $5 million, but on average, franchise start-up costs come in at about $50,000 to $500,000. Always look at the total upfront investment when you’re searching for a franchise to buy.
By law, franchisors must provide franchisees with a franchise disclosure document (FDD) 14 days prior to signing, to review before any money is exchanged. The Federal Trade Commission is the consumer protection agency that polices these transactions and requires franchisors to be very transparent with franchisees.
There are a few more financial details to know about. Other costs involved when purchasing a franchise include royalties usually collected by the franchisor on a monthly basis to provide ongoing support services to franchisees. There are also marketing fees based on a percentage of your revenue and provide franchisees with an advertising plan. Franchise royalties range from four percent of your revenue all the way up to 12 percent or more. The amount is spelled out by the franchisor.
The franchisor will also want to ensure that you can afford this venture. Most franchises have a liquidity standard. This is a requirement meant to ensure that the franchisees have a minimum amount of cash on hand to keep the business afloat until profits come in. The brand will also set a minimum level of net worth that you must have to be considered a prospective franchisee.
Here at Allegra Marketing-Print-Mail, we are very transparent about our franchising costs. Allegra is a leader in the North American print and marketing services industry. Our franchise model has proven to be successful for more than 40 years.
There are three ways to join the Allegra brand; through purchase, converting your business or adding on. Using our Matchmaker program, there is an estimated initial investment of $125,811-$378,185. The initial investment through our Advantage program is $27,861-$249,382.
As an Allegra franchise owner, you’ll provide ongoing print and marketing communications for other businesses in your community. Your fees provide top-notch training from industry leaders from Alliance Franchise Brands—experts in franchise training, technology, and implementation. We are dedicated to helping you assess your business, put a plan in place, diversify your service offerings to capture a broader customer base, utilize our updated technology, and leverage our world-class marketing expertise.
If you want to learn about purchasing with Allegra, you can download our brochure. Our Franchise Development Team is available to answer your questions.