Costs of a Franchise: A Complete Guide to Initial & Ongoing Costs

While a franchise can be a lucrative business opportunity, it’s important to understand the costs involved before diving in. Opening and running a franchise involves a variety of expenses, from initial investments to ongoing expenses, and even unexpected costs.

Let our guide give you a fuller view of the different costs associated with franchise ownership.

First Things First

You’re interested in owning a franchise business, but you want to know how much to anticipate spending. The costs of a franchise can vary widely depending on a number of factors such as the industry, the location of the business, and the type of franchise you choose to pursue.

Opening a new business entails a great deal of planning. Having a sense of what you need to get off the ground will prepare you for how much money you’ll need to spend and how. You should have a solid business plan in place that includes a detailed budget outlining all of the costs involved in opening and running the franchise.

There are advantages to choosing a franchise opportunity over an independent business venture, such as:

• A franchise provides an established brand and reputation, which can make it easier to attract customers.

• Franchisors typically provide training and support to help you get your business up and running.

• You can access a network of other franchisees, which can be a valuable resource for sharing ideas and best practices.

• You should find it’s a proven business model and therefore easily replicable, positioning you for future growth.

Prospective franchise owners generally need to pay more upfront costs than independent business owners, along with ongoing franchise fees and royalties. However, with the right franchise, these costs are more than justified and well worth the price of admission.

Initial Investment

The initial investment is the amount of money you’ll need to pay in order to get your franchise business up and running. This includes franchise fees, which are typically paid upfront, and can range from a few thousand dollars to hundreds of thousands of dollars depending on the franchise. You’ll also need to pay for equipment, inventory, and any renovations or remodeling required for the business location. In some cases, you may also need to pay for real estate or leasing fees.

Recurring Expenses

In addition to the initial investment, running a franchise involves a variety of ongoing expenses. One of the biggest ongoing expenses is payroll, including salaries and benefits. You’ll also need to pay for utilities, rent or mortgage, and any type of regular maintenance or repairs needed for the business location.

Depending on the franchise, you may also need to pay for advertising, marketing, and other promotional materials. Marketing and ad costs vary but are typically based on a percentage of sales over a given period of time (monthly, quarterly, etc.).

Other Costs

There are a variety of other costs associated with running a franchise that you may not have considered. For example, you’ll need to purchase insurance to protect your business from liability and property damage. You may also need to pay for legal fees, accounting services, and other professional services to ensure your business is running smoothly.

Stay Ready for Anything

Even with careful planning, unexpected costs can arise. For example, you may need to replace equipment or make repairs to your business location due to unforeseen circumstances. You might incur unexpected legal fees or fines. It’s important to have a contingency fund set aside to cover these costs, so you can avoid dipping into your profits or taking on debt when something pops up.

Anticipated Earnings

While the costs of a franchise can be substantial, the potential earnings should be significant enough to justify your investment. It’s important to have realistic expectations about your potential earnings. A thorough financial analysis should be conducted to determine what you can anticipate and ensure that your business is financially viable. 

The brand’s franchise disclosure document (FDD) may include an Item 19, which breaks down average earnings for each franchise location and can give you a sense of costs vs. profits should you choose to invest. Before you sign your franchise agreement, it’s worth enlisting the help of an attorney or an accountant. While this is technically an outside expense, these experts can help you navigate the FDD, possibly saving you a lot of time, money, and headaches in the future. Item 7 within an FDD will include details regarding the total estimated initial investment cost.

Invest Wisely with American Family Care

AFC understands that you want to make the most of your franchise investment, and we provide all of the training, support, marketing, and cutting-edge tools you need to help you run your business to its fullest potential for years to come.

In order to be considered for an AFC franchise, you should have a net worth of at least $1.2 million and liquidity of $550,000. This will help ensure you’re well-prepared to nurture your new business during the initial few months, while you’re still establishing a customer base.

The initial investment to own a thriving urgent care franchise with AFC ranges between $1,169,347 and $1,651,712, which includes the initial franchise fee of $60,000. AFC has relationships with third-party lenders who can help you finance the franchise fee, your startup costs, inventory, accounts receivable and payroll.

AFC’s royalty fee is 6% of gross sales on an ongoing basis. This fee will entitle you to operate under the AFC brand name and take advantage of the ongoing support we’re proud to offer our franchisees.

To learn more about franchising with the nation’s leading urgent care franchise, get started today.