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How Much Does it Cost to Start a Retail Franchise?

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Imagine the perks of owning your own business. There's no boss to answer to and no time clock to punch. All of the important decisions are in your hands. (Not to mention the extra earning potential...)

Retail franchises offer a great opportunity to go into business for yourself. You're buying into an established brand with built-in customer recognition. Your job is simply to make sure there's demand in the local market for the type of franchise you select.

There is a wide variety of retail franchises from which to choose. You can open a restaurant, ice cream shop, hardware store, mini mart, fitness center, tax planning service, coffee shop or motel - just to name a few.

Cost to Start a Retail Franchise

It is extremely difficult to estimate the cost of starting a retail franchise because every franchise is different. You could be looking at spending tens of thousands of dollars all the way up to $1 million or more.

One of the first expenses is the initial franchise fee, which can cost anywhere from a few thousand dollars to hundreds of thousands of dollars, depending on the franchise. These fees cover the costs of initial training, support and set-up assistance, and are generally non-refundable.

The largest chunk of money will go toward renting or buying a facility, equipping it and buying the first round of inventory and supplies. For inventory alone, budget anywhere from $25,000 to $150,000. Keep in mind that with a franchise, you can't cut corners when it comes to the facility and equipment. Franchise agreements usually have strict standards to which you must adhere.

Below is a general breakdown of the startup fees you can expect with various types of retail franchises. Keep in mind, however, that these are very general guidelines. You'll need to do some research to come up with exact figures.

  • Sandwich chains typically cost $75,000 to $300,000.
  • Popular fast food restaurants could run as much as $1 million to $2 million.
  • Hair cutting franchises cost about $100,000 to $200,000.
  • Tax planning services usually range from $25,000 to $100,000
  • Popular coffee shops could run $500,000 to $2 million.
  • Convenience stores tend to run $50,000 to $800,000.

Cost to Own a Retail Franchise

Initial startup costs are not the only expense involved with running a franchise. When you buy a franchise you're paying for the right to use the company's name, the company's expertise, advice, and guidance in running your business. In exchange for this, you'll be expected to pay royalties.

Different franchises have different methods of charging royalties. Many base the cost on your gross weekly, monthly or annual income. Usually, you'll be required to pay these fees even if your business isn't turning a profit.

All of this adds up quickly, but don't be discouraged by the numbers. When you're buying an established franchise, you're also buying plenty of earning potential. A business-savvy franchise owner will recoup his or her investment many times over.

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