Buying a franchise can be an exciting path to business ownership.
But before you fall in love with a brand, there’s one question you need to answer honestly:
What can I realistically afford to invest without putting my financial future at unnecessary risk?
After more than two decades working in franchising and helping hundreds of entrepreneurs launch businesses, I can tell you that knowing your investment comfort zone is one of the most important places to start.
I’m Erin Pate, Founder and CEO of FranPursuit. Before starting FranPursuit, I spent more than 20 years in franchise operations, including directing hundreds of new franchise startups across the U.S. for brands in senior care, health and wellness, beauty and retail.
Today, I help prospective franchise owners evaluate opportunities based on their finances, goals, skills and desired lifestyle.
And that means looking at the entire investment, not just the franchise fee.
What Is the Average Cost to Buy a Franchise?
There is no single average cost that applies to every franchise. Each opportunity has its own investment range from low to high.
Franchise investments can vary dramatically depending on the industry, business model, location, real estate requirements, inventory, equipment, staffing and whether the concept is home-based, mobile or brick-and-mortar.
A home-based service franchise, for example, can require significantly less capital than a fitness studio, restaurant or laundromat.
That’s why I don’t recommend starting with:
“What’s the hottest franchise opportunity out there?”
A better question is:
“What investment level makes sense for my financial position, goals and desired lifestyle?”
Just because a franchise sounds interesting or is getting a lot of attention doesn’t mean it’s the right opportunity for you.
At FranPursuit, we start with your finances, the role you ideally want to have in the business and your income goals before we start talking about specific brands.
That’s an important distinction.
What Does It Cost to Start a Franchise?
The franchise fee is only one part of the total investment.
Depending on the business model, your franchise startup costs may include:
- Initial franchise fee
- Real estate and deposits
- Construction or build-out
- Equipment and technology
- Inventory and supplies
- Insurance
- Professional fees
- Licenses and permits
- Training and travel
- Pre-opening marketing
- Payroll and recruiting
- Working capital
This is why Item 7 of the Franchise Disclosure Document (FDD) is so important. It outlines the franchisor’s estimated initial investment and gives you a much better picture of what it may actually cost to get the business open.
Remember, however, that these are estimates. Your actual costs can vary based on your market, location, construction, staffing and other factors.
Don’t Confuse the Franchise Fee With the Total Investment
This is one of the most common mistakes I see.
A franchise may advertise a $40,000 franchise fee, but that does not mean you’re buying a $40,000 business.
Your total investment could be significantly higher.
For brick-and-mortar concepts, real estate and build-out may be among your largest expenses. Other businesses may require specialized equipment, vehicles, technology or substantial inventory.
And almost every new business needs something buyers occasionally underestimate:
Working capital.
You don’t just need enough money to open the doors. You need enough to operate while the business gets established.
Payroll still has to be paid. Rent may still be due. Marketing still needs to happen. And unexpected expenses are part of business ownership.
Working capital gives you breathing room.
And breathing room matters.
Use the FDD to Understand the Investment
The Franchise Disclosure Document should become one of your primary due-diligence tools.
Franchisors covered by the FTC Franchise Rule provide prospective franchisees with an FDD containing 23 categories of information about the franchise opportunity.
Pay particular attention to Item 5 (Initial Fees), Item 6 (Other Fees) and Item 7 (Estimated Initial Investment) when evaluating costs.
Want to understand the document before you start reviewing opportunities?
Read: What Is a Franchise Disclosure Document (FDD)? A Buyer’s Guide to the 23 Items.
How Much Money Should You Have Before Buying a Franchise?
There isn’t one universal number.
Your financial readiness depends on more than the amount sitting in your bank account.
Consider:
- Available liquidity
- Net worth
- Credit profile
- Existing debt and personal expenses
- Total investment required
- Financing options
- Working-capital needs
- Desired income
- Risk tolerance
For example, someone with $100,000 available and minimal debt may be in a very different position from someone with the same amount of cash but substantial monthly obligations.
This is why FranPursuit starts with the person, not the franchise.
What Kind of Franchise Fits Your Financial Situation?
Finances are important, but they’re only part of the equation.
I also want to know what you actually want your life as a business owner to look like.
Do you want to:
- Operate the business every day?
- Build and manage a team?
- Explore semi-absentee ownership?
- Create an additional income stream?
- Replace a corporate career?
- Build a family business?
- Own multiple locations?
- Build an asset you may eventually sell?
Your answers can dramatically change which opportunities make sense.
FranPursuit focuses on matching opportunities to your skills, finances, lifestyle and goals, rather than handing you a list of popular franchises.
Can You Buy a Franchise With $50,000?
Possibly.
Some home-based, mobile and service franchises have lower investment requirements.
But having $50,000 available doesn’t necessarily mean investing all $50,000 is a good idea.
Consider how much liquidity you want to retain, whether you’ll need financing and how much working capital the business requires.
A franchise can technically fit your budget and still be the wrong financial decision.
Can You Finance a Franchise?
Potentially.
Depending on the franchise and your financial profile, funding options may include:
- SBA-backed financing
- Conventional business loans
- Equipment financing
- Retirement-based funding strategies
- Private lending
- Investment capital
- Lines of credit
- Partner or investor capital
FranPursuit maintains relationships with lenders familiar with franchise financing and can help prospective owners understand which funding options may be worth exploring.
My Advice Before You Start Looking at Franchises
Know your numbers first.
Before spending hours researching brands, understand:
1. How much cash you have available 2. How much liquidity you want to retain 3. Your personal financial obligations 4. Your credit and financing capacity 5. How much you’re comfortable investing 6. How much working capital you may need 7. Your income goals 8. The role you actually want to play in the business
Then start evaluating brands.
That order matters.
It keeps you from falling in love with a franchise first and trying to make your finances and lifestyle fit it later.
The Question I Wish More Franchise Buyers Asked
People ask me all the time:
“What’s the best franchise to buy?”
My response is usually another question:
“Best for whom?”
The hottest franchise isn’t necessarily the best franchise for you.
The lowest-cost opportunity isn’t necessarily the safest.
And the highest investment certainly doesn’t guarantee the best return.
The right franchise is one that aligns with your financial position, skills, income goals, desired lifestyle and the role you want to play in the business.
That’s where I believe the franchise search should begin.
Frequently asked questions
How much does it cost to buy a franchise?
There is no single average cost to buy a franchise. Each franchise has an estimated investment range based on its business model. Total costs may include the franchise fee, real estate, build-out, equipment, inventory, marketing, professional fees, payroll and working capital.
What is included in franchise startup costs?
Franchise startup costs may include the initial franchise fee, real estate, construction, equipment, technology, inventory, insurance, professional fees, marketing, payroll, training and working capital.
Can I buy a franchise with $50,000?
Possibly. Some home-based, mobile and service franchises have lower investment requirements. However, buyers should consider total investment, available liquidity, financing and working-capital needs rather than the franchise fee alone.
Can I use an SBA loan to buy a franchise?
Potentially. Eligibility depends on the franchise, borrower qualifications and applicable SBA lending requirements.
What should I review before buying a franchise?
Review the Franchise Disclosure Document carefully and conduct independent due diligence. Consider the total investment, fees, financial performance information when provided, franchisor history, franchisee experience and your own financial and lifestyle goals.
A Final Thought From Erin
Don’t start your franchise search by asking:
“What’s the hottest franchise right now?”
Start by asking:
“What investment level, business model and ownership role make sense for me?”
Once we understand your finances, goals and ideal role in the business, we can have a much more productive conversation about which franchise opportunities deserve your attention.
If you’re considering franchise ownership and want help figuring out where to begin, FranPursuit offers personalized franchise guidance based on you, not a list of brands someone wants to sell you.
Ready to start the conversation? Book a call with FranPursuit. ——————————
Not sure which franchise is right for you?
Let us talk about your goals, your financial position and what you actually want from business ownership. There is no cost to you at any stage.
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About the author
Erin Pate, CFC is the Founder and CEO of FranPursuit and a franchise operations expert with 25 years of experience in franchising. She has directed 350+ franchise start-ups across the United States and worked with brands including Interim HealthCare, Merle Norman Cosmetics and Planet Beach. Learn more about Erin →