Franchise Cost Information
There are a multitude of factors that determine the price of a franchise. From the franchise company and industry you choose to the size and of the franchise, these and other aspects go into the calculation of how much it costs to start and run a franchise business.
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Franchise Fees
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The first cost of starting a franchise is buying into the franchise of your choice. While these fees can vary greatly, the franchise fee generally starts at $10,000 (although there are some below this level) and can exceed $200,000.
Intitial Investment
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Once you pay your franchise fee, your costs for starting the business do not end there. Typically, the franchise you're investing in requires that you have a certain amount of money in reserves, and this is beyond the up-front franchise fee. These reserves are to cover the ongoing expenses of running the business and does not include the potential revenue your business is expected to generate. Some franchises require that the franchisee have two or three months of cash reserves while others require two or three years as an initial investment.
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Other Up-front Fees
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There are some other up-front fees that you need to consider if you're considering investing in a franchise opportunity. Some of these fees include professional fees, insurance, new employee training, business licenses, inventory and equipment necessary to run the business. Depending on the type of franchise, you may also have the expense of leasing a retail or office location, buying the fixtures for the store or location, buying signage for the business and even landscaping the outside.
Royalties
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Beyond the start-up costs and initial investment, you may also have to pay the franchise company royalties. Royalties are a percentage of your sales. Again, royalty fees vary by the franchise, but typically run between 4 and 6 percent of the revenue your business is generating.
Marketing
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Some franchise companies offer you a certain amount of advertising as a franchisee, but there are typically marketing strategies and techniques you'll want and need to implement in order to continue to drive business to your company. Generally, marketing costs can run a minimum of $10,000 per year and exceed hundreds of thousands of dollars in cost.
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