With over 811,000 franchise establishments currently operating in the U.S. and contributing an estimated $897 billion to the economy, franchising is a popular path to business ownership. It offers a unique opportunity to enjoy the independence that comes with running your own business, backed by the support of an established brand. However, while franchise ownership can be one of the smartest paths to business ownership, it’s critical to understand the breakdown of costs for a franchise before diving in. Starting a franchise isn’t as simple as paying a fee and getting the keys to the front door. From upfront investments and ongoing royalties to less obvious expenses like technology fees and working capital, the actual cost of owning a franchise is much more complex than many first-time franchisees expect.
Whether you’re just starting your research, comparing franchise options, or building your business plan, understanding all the costs involved in franchise ownership will help you make a well-informed and confident investment decision.
Let’s take a closer look at the breakdown of costs for a franchise
Understanding Franchise Cost Breakdown
One of the most common misconceptions is that the initial franchise fee covers everything. In reality, it’s just the beginning. Beyond the initial investment fee, you’ll need to account for a variety of additional expenses in each stage of your franchise ownership journey, so you can:
- Set realistic financial goals
- Secure adequate funding
- Avoid unexpected expenses
- Prepare for sustainable growth
To build a strong foundation, you’ll need to account for several key costs, including startup expenses, ongoing operational fees, and hidden costs that can catch new franchisees off guard. Don’t just plan for day one; plan for year three—and beyond. The more comprehensive your planning, the more confidently you can move forward.
Initial Franchise Costs: The Upfront Investment
The breakdown of costs for a franchise starts with the “upfront investment.” We’re referring to the costs you’ll incur before you open your doors. While some are one-time fees, they often require the largest chunk of your startup capital.
Franchise Fee
The franchise fee grants you the license to operate under the franchisor’s brand name. It is a one-time cost for brand rights as a franchise owner. Depending on the franchise, it typically ranges from $10,000 to $50,000 or more, which includes access to training, branding, and support resources.
One of the top franchises to own in 2025 is Kona Ice, which requires a $15,000 franchise fee. Another top franchise, Mathnasium, has a $49,000 franchise fee.
Real Estate and Leasehold Improvements
These location-based expenses don’t apply to all types of franchises. However, if your franchise requires a physical storefront, you’ll need to plan for rent or property purchases, construction, and renovations to meet brand standards. Costs will vary dramatically depending on the industry and market.
Equipment, Inventory, and Supplies
In many cases, you’ll also need to account for industry-specific setup costs. Your startup equipment needs will depend on your business type, from restaurant kitchen equipment to salon chairs or fitness machines. You’ll also need to stock initial inventory and supplies before launch.
In the example of Kona Ice, the franchise fee is only $15,000, but a truck is also required to operate the business, which is estimated at $151,950.
Ongoing Franchise Costs: What to Expect After Opening
Even once your business is up and running, you’ll continue to incur costs that impact your profit margins.
Royalty Fees
Most franchises charge royalty fees ranging from 4% to 12% of your ongoing gross sales as compensation for brand support and ongoing services. These fees are due whether or not you’re profitable.
Marketing Fees
You may also be required to contribute to a marketing or advertising fund. These fees support brand awareness efforts like national campaigns or local promotions.
Employee Payroll & Training Costs
Your team is your most valuable asset. Employee payroll, training, and ongoing professional development are essential for customer service, compliance, and performance. Costs will vary depending on location, staffing needs, and training requirements set by the franchisor.
Hidden Franchise Costs Investors Should Know
Some expenses aren’t as obvious but are critical when budgeting for the long term. Some are temporary, while others are recurring.
Working Capital
Many franchises take several months, or longer, to become profitable. Working capital ensures you can cover rent, payroll, and operating costs during slower months or unexpected setbacks.
Technology and Software Fees
Franchise systems often require you to use specific technology platforms, such as point-of-sale (POS) systems, inventory software, or reporting tools. These tools typically require monthly or annual subscription costs.
How to Budget for a Franchise Investment
Start by considering the total cost of ownership. We recommend utilizing the Franchise Disclosure Document (FDD) as your financial roadmap. It outlines average startup costs, estimated ongoing expenses, and any additional fees you might face, such as the franchise fee, real estate, equipment, inventory, royalties, marketing, payroll, and working capital. You may also want to consult with a financial advisor to create a realistic, long-term financial plan.
- Build a 3- to 5-year forecast. Account for both expected revenue and expenses, and don’t assume immediate profitability.
- Include emergency funds. Plan for equipment failure, seasonal slowdowns, or unexpected staff turnover.
- Don’t forget to consider personal expenses. If this franchise is your full-time income, include your own salary in the budget.
- Work with a professional. A CPA or financial advisor, especially one with franchise experience, can offer valuable insights throughout your journey.
Beyond budgeting, it’s also important to explore franchise financing options. Franchisees often fund their businesses through a mix of personal savings, SBA loans, retirement rollovers, or partnerships. Not sure what you can afford? Try our Franchise Financing Calculator to determine your options.
Franchise Cost Breakdown Across Industries
Still trying to decide which type of franchise you want to own? You may be able to narrow down your choices based on your budget, as franchises vary widely in terms of financial commitment.
Franchises with lower overhead, like home-based or mobile models, such as cleaning services, consulting, and pet care, often require a lower initial investment. On the other hand, franchises requiring significant real estate, staffing, and expensive equipment will cost much more.
Low-Cost Franchises
Looking for a franchise that requires a minimal investment? Consider industries like travel and hospitality, advertising, real estate, and other professional services. Here are some franchises with a minimum investment of under $30,000.
One great example of a lower-cost franchise is Cruise Planners, with a total startup investment of up to $23,464.
Medium-Cost Franchises
For those with a little more cash to invest, you might consider purchasing a cleaning business, a pest control business, a photography business, or a landscaping business. There are several franchises available from $50,000 to $99,000.
For example, TSS Photography, a highly rated franchise, has an investment range of $20,415-$74,725, with $10,000 in cash required.
Higher Cost Franchises
Considering purchasing an ice cream shop, retail store, or fitness studio? These require a physical location, inventory, and more extensive equipment, and range from $100,000 to $199,000.
Highest Cost Franchises
Your investment and ongoing expenses will be much higher for businesses that require more staffing, extensive real estate, significant inventory, and/or equipment. Full-service restaurants, hotels, or automotive service businesses typically fall into this category. Here are some franchises with a minimum investment of $200,000+.
Take the Next Step in Your Franchise Journey
At Franchise Business Review, we’re here to help you navigate the world of franchise ownership so you can make the most informed decision possible. We provide independent research, real franchisee satisfaction data, and in-depth buyer guides to help you compare opportunities and choose the brand that best aligns with your goals. Take your time when looking at the franchise cost breakdown. Make the leap with all the information you need.
Ready to take the next step to owning a franchise? Browse our library of resources to guide your investment decision with clarity and confidence.
