Restaurant franchise costs vary from restaurant to restaurant. Get familiar with the breakdown of typical restaurant franchise costs and how they compare.
Fast Food Franchise Cost: What to Expect
Buying a restaurant franchise comes with advantages over starting your own business. Startup costs vary. You should know exactly what expenses are involved before deciding to invest in what can be a profitable business. Let’s answer some key questions so you know what to expect about restaurant franchise costs.
How Much Money You Need
The cost to open a restaurant franchise can vary depending on the type of restaurant you want to open. According to Franchise Direct, a restaurant with table service and sit-down dining will be more costly to open than a fast-food restaurant. Fast-food franchise costs are often lower making them more accessible investment options. Other factors also play a role in opening costs:
- Location: The cost of real estate differs by region and can affect not only your initial investment but ongoing costs as well.
- Restaurant size: A sit-down restaurant may require more space to serve customers than a fast-food establishment with a drive-thru. The amount of space you need will influence costs.
- Franchisor requirements: Franchisors typically have guidelines for what size location you’ll need, if there’s a drive-thru option, and if seating will be necessary. Be sure to examine franchisors’ requirements to see if they fit your vision and means.
How much money you need depends on the brand. Carefully researching the restaurant brands you’re considering and learning about their specific costs and financial performance is an important part of your due diligence. Make sure you meet the financial requirements and that the initial investment is not out of your reach.
Ongoing Costs: Why They Matter
Fast-food franchise initial costs tend to be lower, but the profits can be sizeable. According to Fransmart, fast-food franchises can have at least twice the profitability of your average small business, depending on factors like menu and location.
But there are also ongoing fees to be aware of. These fees help the franchisor support the entire franchise system. Let’s examine some of these fees:
- Royalties: Paid as a percentage of gross sales, royalties typically run between 5%-6% but vary depending on the franchisor.
- Advertising fees: These fees can be 2%-4% of gross sales but, like royalties, will vary by franchisor. These fees support local and national marketing campaigns that benefit the whole franchise family since they boost brand awareness.
- Tech support: Some franchisors have proprietary software that franchisees use to operate their businesses. Such tech must be supported through ongoing fees to facilitate updates and training.
Own a Freddy’s Frozen Custard & Steakburgers: What It Takes
Freddy’s Frozen Custard & Steakburgers is an award-winning, family-focused business that America craves and franchise owners love. Our core values include quality, cleanliness, and hospitality. If you’re enthusiastic about the Freddy’s brand and want to love what you do every day owning a Freddy’s restaurant, here are some of our franchise requirements:
- Minimum net worth: $1 million
- Minimum liquid assets: $400,000
- 4-unit minimum investment
- Initial investment: $794,254-$2,327,329
- Initial franchise fee: $30,000
- Royalties: 4.5%
- Marketing fee: 1.5%
Freddy’s is the perfect addition to any franchise portfolio, especially for multi-unit investors. We have exclusive territories available across the U.S. And we’re flexible about growing into non-traditional spaces, meeting the need for Freddy’s wherever it happens to be.
Our simple menu with multiple dayparts, high-quality food made from premium ingredients, exceptional customer service, training, and support just add to the reasons Freddy’s is a great investment. We work hard so our franchisees can take advantage of every opportunity to succeed.
Fill out and submit a franchise form today. Our Franchise Development Team is waiting to chat with you.