How Much Does It Really Cost To Franchise My Business in the US?

by FMS Franchise | Articles
7 minutes
How Much Cost Franchise My Business Usa

“How much does it cost to franchise my business?” are often the first words out of someone’s mouth who has already decided that franchising is the best strategy for growing their business. The problem is, there is no one answer to this question. This post will look at how we calculate what it costs to franchise a business, and how you can hire a franchise business development company to assist you on your entrepreneurial journey.

Table of Contents

What Will It Cost To Franchise My Business In The US?

It depends but below you will find some of the 7 required steps you will need to know to franchise your own business and the associated costs.

  1. Strategic Planning
  2. Franchise Documentation
  3. Sales & Marketing Plan Development
  4. Marketing Materials
  5. Promotion & Advertising (1st year)
  6. Operations Manual
  7. Training Program

1. Strategic Planning

The Program Planning process, or “Foundation” phase, is the first and most important phase of the franchise development process. It lays the groundwork for your franchise offering, which all other phases will build upon. This phase not only gives you a clear picture of who you are and where you are going – but it also puts the franchise and franchisor relationship into perspective.

2. Franchise Documentation

A franchise disclosure document is a disclosure document issued to the prospective franchisee by the franchisor that describes the details of the franchise relationship (FDD). In the United States, state law requires every franchisor to provide a prospective franchisee with a copy of their FDD, and also required to register their FDD with each separate state in which they intend to offer franchises.

An FDD is a peculiar beast. It’s not a long-sale tool. It’s designed to help the prospective franchisee make a more informed decision and it’s important to remember one thing: The documents state exactly what is expected by the franchisee and the franchisor, it is a legally binding document and should be taken seriously by both parties. 

An FDD is prepared by counsel, subject matter experts and consultants who have spent countless hours with your management team, financial reports and reviewing confidential documents. Before signing a franchise agreement, make sure you fully understand what these upfront costs will be and have an idea of how much money you’ll need to get your business running.

3. Sales & Marketing Plan Development

Once the franchise objectives for sales and profit are established, you need a plan to achieve them. This will include a forecasted growth business plan showing annual cash flows, revenue projections, and marketing expenses over a reasonable period of time. 

It’s important you put a lot of time and effort into your sales and marketing plan development to avoid any pitfalls. One good way of doing this is by working with franchise consultants. 

Franchise consultants often have previous experience in developing pitches and proposals, so they know how to structure your marketing plan, making it easier for you to showcase your business to potential franchise investors. The importance of a good sales and marketing plan can’t be overstated – this is your pitch deck and it is how you are going to find your investors.

4. Marketing Materials

As a franchisor, you will need to develop a set of franchise materials in order to market your franchise. These franchise materials will consist of a franchise website (or pages within your current site), a franchise brochure, application form and/or presentation, and other tools like the franchise disclosure document to allow you to qualify the prospective franchisee.

5. Promotion & Advertising (1st year)

Establishing a budget for your initial marketing expense for franchisees is somewhat arbitrary. It will depend on how aggressively you plan to market your business and the speed at which you want to grow. Remember, it’s likely the biggest expense is going to be for franchisee advertising: social media, google ads and other forms of digital marketing, etc. It’s also important not to forget about non-advertising expenses like your website, public relations, travel costs and other promotional materials. 

6. Operations Manual

The Operations Manual is like the heart of your entire franchised business. It is the central repository of all business processes, procedures, and standardized tools. The Operations Manual will be a big undertaking, but it is essential to the success of your franchising system. Many people use this document every day… and if you use it right, it will make everyone’s job easier and also help to protect you in case of a dispute with a franchisee or employee.

7. Training Program

The franchisor should have an initial outline of the required business processes. These processes are important to cover during training because they establish how the system is operated. This initial outline can be refined as part of the review process, if necessary. Franchise instructors will develop initial outlines for owner training and operator training. 

This is a very effective process because it creates a consistent trainer memory for the new franchisees. The curriculum that results from this process is a very valuable tool for your new owners- operators to learn how to do tasks on their own that were initially performed by you and your team members.

So, How Much Will It Really Cost?

The cost of franchising will depend on the specific franchise model that you choose. Therefore, the best way to determine your total investment is to interview multiple established franchisors and specifically ask about their range of fees for different services. Your goal should be a clear understanding of what these fees cover and what, if anything, is not included. 

This will help you avoid any costs that could spring up later and surprise you, as well as any undisclosed fees that may be part of the franchise agreement, such as future royalties or marketing support. Working with a seasoned franchise consultant group can also be a good idea, they have years of experience in the franchising market and may be able to give you a better idea of what you’re getting into.

Can A Franchise Development Company Help?

Hiring a franchise consultant is often seen as a business development expense, something that is done once to help the company get started. In fact, almost all the costs of a franchise consulting company should be viewed as an investment specifically in franchise development.

If you want to succeed in the world of franchising, you need the assistance of a franchise development company. Franchise Marketing Systems will help you evaluate your ability to succeed in the marketplace, they will prepare you so that your first footsteps into the market are sound, they will provide a plan for how to get your business up and running, and they will advise you how to sell your franchise business.

The Takeaway

The cost of franchising an existing business will vary, depending on a number of factors. Your franchise agreement must be reviewed by legal experts and obtaining your government permit or license can be costly as well. The exact total cost will depend on the strength of your business plan, location, equipment and inventory, and ongoing costs. what might be included in your franchisor package; and whether your current business is already operating. 

Remember, franchising is not just filing legal documents, you need to plan for everything listed above. For more specific information on these costs and a thorough look at what it takes to franchise your business, request a free consultation.

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