A Quick Guide to Franchise Ownership Costs

Franchising costs money. Here's what everything means.

- CLARISSA BUCH ZILBERMAN

Once you've settled on the right franchise brand for you, it's time to run the numbers from one-time costs to all the associated fees that come with buying and operating a franchise day-to-day.

There are many costs unique to franchising that every franchisee-to-be should be aware of. While these fees will be clearly outlined in the Franchise Disclosure Document (FDD) that you are required to review before buying the franchise, it's best to know what these terms mean right from the start.

Franchise fees

One of the biggest perks of franchising is buying into the company's preexisting model, business method, and support systems - not to mention the right to use its trademark. To do that, you must pay what's called a franchise fee. These fees differ from franchise to franchise, but they are typically a one-time payment.

What exactly are you paying for? The franchisor is responsible for developing and maintaining its business model, training you, and providing you with a support system. This fee helps the franchisor recoup some of those costs.

Royalty fees