Franchise Fees 101: A Complete Guide to Franchise Costs

If you're looking to buy a franchise, be sure you know which franchise fees to expect. Here are some of the costs to look for, why they're paid, and what you get for your money.

INITIAL FRANCHISE FEE

Not to be confused with the total upfront investment, the initial franchise fee is a one-time payment made to the franchisor upon signing of the Franchise Agreement. Depending on the company, sometimes this information is upfront and readily available on their websites. Otherwise, it will be disclosed in the Franchise Disclosure Document (FDD).

Initial fees vary, depending on the industry and the brand. The fees, typically collected in a lump sum payment when the franchise agreement is signed, allow franchisees to license the brand name and gain access to the organization's unique methods and intellectual property. A common misconception is that these fees simply pay for the use of a brand’s name. With the best franchisors, your investment covers training, site selection assistance, marketing, and operational support as you prepare to open your business.

Research shows an interesting correlation between franchise fees and revenue. Brands that charge higher initial fees realize 2.5 times more revenue than those that charge lower buy-ins. And the higher potential for revenue, the more franchisees are willing to pay a higher fee.

LOCATION & BUILDING

Depending on the industry, you may need to purchase or lease a location for your business. Different franchises have specific size and location requirements to qualify a space as a suitable outpost for their brand. Other critical factors can include visibility, accessibility, and traffic counts.

Your franchisor understands the importance of selecting the perfect location for your business and has a team of experts ready to assist with site selection using sophisticated market analysis tools and a comprehensive database of industry-specific brokers in your area.

Your investment will vary based on a range of factors. They include location, real estate market values, building size, and starting condition. Working with the franchisor to help select a location that meets their specifications will give you a better sense of how much it will cost to get your business up and running. The price of renovations, construction, and other improvements will factor greatly into your overall franchise startup costs.

TRAINING & ONGOING SUPPORT

The right franchisor will be dedicated to training and preparing you and your team to run your business with confidence and finesse. With The Tailored Closet, the support program implements both comprehensive pre-opening training and ongoing support.

The Tailored Closet is pleased to provide all franchisees access to an expert team operating at the top of their game within the multi-billion-dollar home organization industry, ensuring that every dollar you invest into your new venture is well allocated to the growth of your business.

This broad-spectrum approach ensures that you will have all the tools you need to run your business successfully while buoyed by the knowledge that if any challenges arise, expert assistance from your franchisor is always available to you.

INVALUABLE MARKETING WISDOM

Franchisors typically require an ongoing marketing royalty to be paid in exchange for services rendered. For prospective business owners still debating whether to open their own independent store or invest with a franchise, the level of marketing expertise and involvement is an undeniable benefit provided by the latter. Marketing is crucial to the success of any modern business, and a franchisor employs a team of experts, complex marketing tools, and ongoing campaigns that allow you to focus on running your business instead of worrying about attracting customers.

The Tailored Closet relies on a combination of a winning track record, nationwide brand awareness, and a marketing team committed to drawing new customers to your business from day-one onward.

As part of an award-winning franchise system, you will benefit from the years of experience that The Tailored Closet’s marketing team brings to your business. The Tailored Closet invests your marketing fees back into your local market in order to promote your business, as well as maintain a strong digital presence and reach a broad customer base.

REAP THE BENEFITS OF JOINING A FRANCHISE

While your initial franchise fees go directly towards all 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 will 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 one of the nation’s foremost home improvement brands, The Tailored Closet strives to provide the highest level of quality, customer service, and franchisee satisfaction.

Visit us to learn more about how to become a franchise owner with The Tailored Closet today.