One of the crucial factors for potential franchisees in making a purchasing decision and buying a franchise is the cost of owning a franchise. Since this is an important investment, which will depend on your levels of finance, you need to know exactly what you’re getting into. But the franchising world can seem a bit confusing. Especially when it comes to the costs involved. In this article, we’ll explore the different types of costs you can and should anticipate and help you decide which franchise to choose.
Table of contents:
The upfront franchising fee
Answering the question of how much does a franchise cost is not as straightforward as it may seem. The reason for this is that there are low-, medium- and higher-cost franchises in a wide variety of industries and each one is completely different to the next. However, one thing that’s constant across all franchises is the fact that you’ll be required to pay an initial and upfront franchise fee. So, what does this cover? Essentially, it gives you the rights to use the intellectual property and business licence of the franchisor for the duration of your relationship with them. In other words, the length of your agreement as depicted in your Franchise Agreement.

Working capital
The other costs that are associated with the total purchase amount of a franchise includes working capital. However, this working capital is divided into several sub-categories of expenses that will need to be incurred in order to help you determine how much does it cost to buy a franchise. Here is a breakdown of just some of the working capital costs you can expect to encounter along the way.
Professional fees: legal, accounting and consulting fees
It goes without saying that you’ll need a legal expert to take a look at the Franchise Agreement before you sign on the dotted line. These experts typically charge quite substantial fees, as do accountants and other consultants whose services you may wish to use.
For example, if you’re planning on purchasing a hotel franchise, you may need the services of a property consultant for the layout of the property and the building requirements, marketing consultants to help you figure out the size, scope and demographics of the market and more. Business licensing will be a further cost consideration to bear in mind.
The actual location: land and premises
Another important criterion for determining how much to buy a franchise is deciding whether you’ll be home- or office-based. If you’re home-based, then land, premises, rentals and office space will not be a factor for consideration.
However, if you’re planning on running a restaurant franchise, for example, then land and premises will be crucial. The cost of the commercial property which you purchase will possibly be one of the biggest costs that you’ll need to be prepared for. These can go into the hundreds of thousands of pounds.
Inventory and equipment
Once the premises have been taken care of, inventory and equipment will be next on your list. This may range from computers and software to food and drinks for your food or restaurant-based franchise business.
Insurance
Insurance is another important cost factor. It can range from professional indemnity insurance to personal liability insurance and more. Since most franchises are service-based and mishaps may occur, you need to be prepared for accidents and reduce any reputational damage your business may suffer as a result of a lawsuit or an unhappy customer who takes to the internet to express their dissatisfaction with a service provided by your business.
Recruitment and training
Furthermore, you’ll need to decide what type of role you’ll play in your franchise business. Will you follow a more hands-off or a hands-on approach where you’re involved in the day-to-day management of affairs?
If you plan on taking either approach, you’ll still need staff. This, in turn, will result in additional costs of recruiting and training your new employees to deliver the service you’re offering to the highest standards. As a result, this is just one more consideration when it comes to how much is it to buy a franchise.
Marketing and advertising
Since franchising is very much about buying into an established brand and trade name, your franchisor will want to have consistent brand messaging across the entire franchise network. Hence, it is often a requirement that franchisees pay either a fixed amount or a fixed percentage of their turnover towards a common marketing and advertising budget.
Royalty fees
Another working capital consideration when working out how much is a franchise relates to the royalty fees. These fees are a constant feature of all franchises and franchise business models. However, they may be expressed as a percentage or a fixed cost as it relates to your turnover. These are ongoing fees that can be paid monthly or annually and must also be taken into account.
Ongoing expenses
There are further ongoing expenses that will also form a part of your working capital. These may include but will not be limited to supplies, salaries, professional fees, rent, utilities, maintenance, uniforms, etc.

Which franchise should you choose?
With all this in mind, you can now figure out which franchise to choose based on the financial aspect of the operation. Bear in mind that there are some franchise directories that can quickly, easily and accurately indicate to you how much it costs to buy into a franchise.
These directories, such as Franchise Fame directory, typically indicate both the initial franchise fee and the working capital you’ll be required to have upfront in order to run your business effectively from day one.
Concluding thoughts
When it comes to the question of what is the average cost to buy a franchise, there is no single or simple answer. This is because every franchise operation is completely different to the next and the costs will differ substantially. This is despite the fact that all franchises tend to operate on the basis of a proven business model and share common modalities for operating.