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Franchises are becoming an increasingly attractive choice for many entrepreneurs. Even though the economy is slowly climbing out of recession, many challenges brought by the downturn are still there – and with the cost to buy franchise often being far below of what it would take to establish a successfully operating business from scratch, it is a good time to open a franchise business. However, the franchise cost has several aspects that every insightful entrepreneur looking forward to opening such a business needs to know.

Costs to Open a Franchise
Essentially, the costs to open a franchise are twofold, consisting of initial fees and ongoing franchise costs. Both should be carefully evaluated and researched before signing a franchise agreement, as financial issues can easily break even the most lucrative deal.

To begin with, you have to pay an initial fee to open a franchise, except in rare circumstances. Such a fee may range from as little as several thousand dollars to as much as six figures. The average fee for a franchise ownership is around $20,000-$30,000, with mobile and home-based business franchises usually featuring the lowest fees. A franchisor may also require the potential franchisee to meet other financial requirements.

In addition to the initial fee you will need to purchase a franchise ownership. The cost to buy a franchise will also be slightly increased by professional fees (for instance, paid for legal services), insurance expenses, hiring and training of employees, purchase of operating licenses, acquisition of inventory and equipment, rent, décor, signage and other rather small, yet important expenses. You need to make sure to calculate them into the projected cost of a franchise.

Franchise Costs – The Beginning Is Not Everything
However, the initial fee and expenses form just a fraction of the total franchise cost. To open a franchise, you will also need to make an initial investment, as well as have a certain amount of funds available, along with enough net worth and working capital in place to support the ongoing expenses.

The investment and ongoing expenses form a major part of franchise costs and total investment can vary very significantly, depending on the industry you are interested in, for instance:
· auto repair companies – from around $200,000 to $300,000
· fast food restaurants – from around $250,000 to $1 million
· full-service restaurants – from around $300,000 to $3.5 million
· lodging industries – from around $4 million to $6 million

Entrepreneurs looking for a small business franchise ownership will probably be interested in mobile and home-based business franchises, as they are the cheapest to open and maintain.

The franchise costs can be very different even in the same field, as every franchisor has its own set of requirements and procedures. In some cases, the initial fee may cover training, support and assistance with site selection, as well as the cost of some basic equipment. There is no set of common rules in this area and you will need to consult a particular franchisor. For instance, inventory costs may range from $20,000 to $150,000 – make sure you get an estimate of how much you will need to invest after choosing a location for the franchise.

Another important factor is the working capital – it may need to sustain business operations for a certain amount of time, which may range from just a few months to several years. Naturally, after everything is included, the cost of a franchise may be considerably higher or lower compared to what you expected.

Despite all the expenses and efforts that will be needed to open a franchise, such a move can be truly rewarding. Opening a franchise is a clearly easier and more convenient undertaking than starting a new business from scratch, mostly due to the lower risk and cost of a franchise – and if you do your research well and make such a decision carefully, the initial investment will be returned in no time. Determining the exact franchise cost is the most important step here, don’t you agree? 

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