How to Determine Your Total Cost When Investing in a Franchise | VetFran

When you consider purchasing a franchise, figuring out your budget is likely the main concern. The cost of purchasing a franchise can vary depending on a number of factors, including your industry, geographic area, the size of the brand you are considering and the services included in your franchising fee.

Understanding how all of this factors in can help you determine exactly how much you are able to spend and what your total investment will be before you sign your franchise agreement.

Costs Associated With Buying a Franchise

Initial Franchise Fee. The initial franchise fee is a one-time cost that basically gets new franchisees “in the door.” It is paid upon signing the franchise agreement and grants the franchisee the permission to use branding materials and the franchise name, as well as providing access to training, resources and expert advice the franchisor provides. These will generally be around the $20,000 mark but can go up to $100,000 for established brands in some cases.

Required Purchases. In some industries, there will be things you have to buy, such as cooking equipment for restaurants or inventory for stores. Your franchisor can typically go over how much you can expect to spend on these things and might be able to provide industry discounts to those in their system.

Rent and Location Fees. Every franchise system handles the securing of the physical location differently, but these costs are generally not negligible. You will typically need to pay something for your brick and mortar location in the beginning, as well as budget for your monthly lease costs.

Signage and Marketing Fees. Paying for all your branded material and access to the brand’s marketing plan will vary based on your franchise, but they are things to budget for. Typically, things like your sign, door decals etc. will be a one-time fee, and then there will be an ongoing marketing fee that will cover both the digital and physical marketing expenses that your franchisor is investing into your location.

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