For investors considering a food franchise business, two of the biggest considerations are the initial investment outlay and subsequent/ongoing fees. When researching potential companies, it’s important to have a clear picture of the requirements to ensure a good fit. Here are some common expenses incurred that may serve as valuable discussion points with franchises to determine if a restaurant is budget-friendly.
- Franchise Fees: A franchise fee is a one-time set amount the franchise owner requires of new franchisees for a single restaurant. If you’re interested in more than one location, it’s worth asking if the business will offer a discount for a second franchise purchased at the same time.
- Royalties: These fees are paid by franchisees to the company on an ongoing basis. The charges can either be a fixed amount or based on a percentage of gross revenue.
- Marketing and Advertising Fees: With each franchise business, there will generally be a requirement for franchise owners to contribute to a fund to support both local and national marketing and advertising efforts based on their gross sales.
- Products and Services: Some businesses require franchisees to buy specific goods and services to support their business and, often, from a particular company affiliated with the franchise.
- Training Fees: Depending on the business model, a franchise may pass fees onto franchisees for training and testing, documentation, and other support.
For a complete list of fees, be sure to review the Uniform Franchise Offering Circular closely. Then compare businesses you’re considering to decide the best opportunity for you.
Please contact us today at 702-751-7943 or lee@zabas.com to learn more about our Mexican franchise.