In addition to this royalty fee, a franchisee also pays another 2-6% for advertising (Zachary Crockett / The Hustle) For his Taco Bells, Aminmadani pays 5.5%. Like other franchisees we spoke with, Aminmadani pays ~ 25% of this amount ($400k-$575k) in cash, then uses loans and/or investors to cover the rest.Īnd what does a chain get out of letting someone else build and own a property under its brand name? Aside from the franchise fee mentioned above, it generally takes a royalty fee of anywhere from 4-8% of the store’s monthly sales. Shareef Aminmadani, whose family runs 64 Taco Bell franchises in Tennessee and Kentucky, tells The Hustle that his initial investment usually breaks down like so: Though, according to the franchisees we spoke with, it’s realistic to expect to be on the higher end of this. Overall, the average fast-food franchise costs between $777k and $1.9m to open. (We ranked the results by the highest estimate.) The chart below visualizes the lowest and highest range of what a given franchise might cost. A McDonald’s in a small Southern town might cost 50% less than one in a major city.įor this reason, the estimated cost of a franchise is listed as a range in franchise disclosure reports. This figure, called the total initial investment, varies widely based on the type of storefront (mall, drive-thru, dine-in) and the location. It’s the franchisee’s responsibility to cover all of these costs prior to opening. “When it comes time to build, the franchisor is generally pretty hands-off.” “The doesn’t want any liability with financing or developing,” says Reas Kondraschow, who owns 9 Five Guys in Broward County, Florida. The bulk of the cost, though, lies in the development of the store: Real estate, building fees, equipment, inventory, and everything else necessary to get a new restaurant off the ground. The rights to big burger chains like Jack in the Box and Burger King will set you back $50k sandwich chains like Subway can be had for $15k. If you’re fortunate enough to get accepted, the first thing you’ll do is dish out a franchise fee - an upfront, one-time payment for the right to enter into business with the chain.Īt an average of ~$30k, franchise fees make up only a small part of a franchisee’s total investment. Burger chains and chicken chains appear to have the highest barrier to entry: To launch a Wendy’s, you need to have at least $5m in the bank, with $2m in liquid assets. The average chain we looked at requires an applicant to have a minimum net worth of $1m ($500k of which is liquid). To better understand the capital required to acquire and launch a fast-food franchise, The Hustle spoke with more than a dozen franchise owners and analyzed data from franchise disclosure documents filed by 22 of the largest domestic chains.įor starters, it’s a feat just to qualify to buy a fast-food franchise from one of the big players - a franchisee has to be prettttttt-y pretttttt-y wealthy. How much does it cost to buy a fast-food franchise? Many chains won’t even look at your application unless you have a net worth of $1m and $500k in readily spendable cash sitting around.īut there’s an exception to this: A Chick-Fil-A franchise - one of America’s oldest, largest, and most profitable chains - can be yours for just $10k.īefore we get into how this is even remotely possible, let’s first take a step back and look at the economics of a traditional fast-food franchise deal. Many people dream of buying a fast-food franchise of their own, but few can afford it.Īll told, it might cost a franchisee upwards of $2m to develop, build, and buy the right to open a McDonald’s or a KFC. Instead of buying and developing new properties with their own money, most national chains (franchisors) will allow a party or individual (franchisee) to front the development bill and take a stab at ownership in exchange for a cut of the sales. In America, the majority of fast-food restaurants aren’t owned by the corporation itself, but by franchisees - individuals who pay for the right to use a brand name.
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