The franchise cost estimator calculates the total investment required to open a franchise — from initial fees and build-out through working capital requirements and ongoing royalty obligations.
Startup Costs
Revenue & Ongoing Fees
How to Evaluate Franchise Costs
Buying a franchise is a major investment. The franchise cost estimator shows the full picture — from initial outlay through ongoing royalty obligations — so you can evaluate whether the economics make sense.
The True Cost of Royalties
Royalties are often underestimated because they're percentages. On $800K annual revenue at 6% royalty + 2% marketing fund, you pay $64,000/year in franchise fees — regardless of whether you're profitable. This is $320,000 over 5 years on top of your initial investment.
The FDD Item 19
Before investing, request the Franchise Disclosure Document (FDD) and pay close attention to Item 19 (Financial Performance Representations). Not all franchisors are required to disclose financial performance. Item 7 lists all required startup costs. Compare these to your estimates and adjust accordingly.
FAQ
What are the typical costs to buy a franchise?
Initial franchise fee: $20K-$80K. Build-out/renovation: $50K-$500K. Equipment: $20K-$200K. Working capital (6 months): $50K-$150K. Total investment ranges from $150K (simple service) to $2M+ (restaurant chain). The FDD (Franchise Disclosure Document) lists Item 7 with all required costs.
What is a franchise royalty fee?
Ongoing royalties are typically 4-8% of gross revenue, paid weekly or monthly. On $1M annual revenue with a 6% royalty, you'd pay $60,000/year to the franchisor regardless of profitability. Some franchises also charge marketing fund fees of 1-4%.
How do I calculate franchise ROI?
ROI = Annual Net Profit ÷ Total Initial Investment. A franchise costing $500K total with $75K annual net profit yields 15% ROI. Industry average for profitable franchises: 10-25% annual ROI. Factor in 5-7 years to recoup investment.
Is this calculator free?
Yes, completely free. No signup required.