You can’t put a price tag on the advantages of operating a proven concept and recognized brand. But before investing in a franchise, take the time to understand the costs of franchising to determine if you have the financial capacity to achieve your business goals. Here’s an in-depth look at the most common costs associated with franchising, to give you the insights you need to make an informed decision.

Initial Fees and the Basic Costs of Franchising

Opening a franchise location involves several steps, each with its associated costs. The Tailored Closet, a whole-home organization franchise, breaks down the costs of franchising:

Initial Franchise Fee

As part of opening a franchise, you’ll need to pay an initial franchise fee to the franchisor for the rights to use the brand, system, and resources. The franchise fee for The Tailored Closet is $19,950.

Training Fees

Some franchisors charge for initial training programs that cover operations, management, and other aspects of running the franchise. Our training program includes more than 100 hours of virtual and in-person learning to ensure franchise owners have the knowledge they need to get started.

Real Estate Costs

These are expenses for leasing or purchasing a location for the franchise. The Tailored Closet doesn’t require a storefront, which helps trim overhead costs. You will need a warehouse or storage facility to house supplies, and we charge a $55,000 territory fee to secure your location. Each of our protected territories has a minimum of 100,000 households.

Equipment and Supplies

This includes costs for purchasing necessary equipment, furniture, and initial supplies to operate the franchise. Our franchisees need a trailer and forklift for transporting home storage solutions. Many of our owners opt to lease the equipment to cut down on costs.

Inventory

You’ll need to plan for initial stock or inventory required to start the business, relevant mostly for retail and product-based franchises. The Tailored Closet requires minimal inventory. We rely on 3D software to highlight our products for customers.

Legal and Accounting Charges

These are costs for professional services like legal counsel for reviewing franchise agreements and accounting services for financial setup.

Insurance

Franchisees are required to obtain the necessary insurance coverage, which may include general liability, property, workers' compensation, and other types of business insurance.

Types of Ongoing Franchise Fees

Once your franchise is operational, you'll encounter ongoing fees. Additionally, operational expenses like payroll, utilities, and inventory replenishment are part of the ongoing costs of a franchise.

Royalty Fee

A royalty fee is an ongoing payment that a franchisee makes to the franchisor, usually as a percentage of the franchisee’s gross revenue or sales. This fee is typically paid weekly, monthly, or quarterly, and is used to compensate the franchisor for providing continued support, brand usage, and access to proprietary systems or intellectual property. The royalty fee is one of the primary ways franchisors generate revenue from their franchise network.

Marketing and Advertising Fee

This includes initial marketing costs and ongoing advertising fees, which may include contributions to a national or regional marketing fund. The Tailored Closet requires our franchisees to pay 1% of monthly gross revenue to a national advertising fund to help promote the brand.

Technology and Software Fee

You’ll pay for purchasing or licensing required technology and software systems, such customer relationship management (CRM) tools. An ongoing fee keeps your technology up-to-date.

Financial Qualification: Are You Ready?

Determining if you're financially ready for a franchise involves more than just having the initial capital. Most franchisors require proof of a certain level of liquid assets and net worth to ensure you can support the costs of franchising, especially in its early stages. It's about having enough financial cushion to sustain the business until it becomes profitable. In addition to the initial franchise investment, we require our franchisees to have a net worth of $350,000 and at least $111,220 in cash.

The timeline for seeing a return on your investment (ROI) varies. You can get insights by conducting validation with existing franchise owners. The franchise disclosure document (FDD) may also provide a look at some of the top-performing locations in the system.

Reap the Benefits of Joining a Franchise

While your initial franchise fees go directly toward the franchisor’s efforts to get your business up and running, the support doesn’t end after opening day. As part of your investment, you’ll have access to a broad network of suppliers, fabricators, and vendors, not to mention the in-house management leaders who are just as invested in your success as you are.

As a franchise under $200k, The Tailored Closet offers a wide range of products, from custom closets to garage storage solutions. We cater to homeowners as well as local businesses, schools, and property management companies to increase potential profitability.

If you're passionate about business ownership, The Tailored Closet is a proven business model in a high-demand industry. The home organization market was valued at $11.7 billion in 2024, and has a compound annual growth rate (CAGR) of more than 3.5% through 2029, according to Mordor Intelligence.

To learn more about how to become a franchise owner with The Tailored Closet, inquire now.