Franchise Financing Report
Initial Costs of Opening a Franchise
The initial costs of opening a franchise are heavily detailed in your prospective franchisor’s Franchise Disclosure Document (FDD). They include:
- Initial franchise fee: cost paid to the franchisor to buy the business. It may or may not include training, location selection, ongoing support, etc.
- Capital investment: money for the start-up inventory, property taxes, legal bills, zoning fees and more. This investment can also include real estate and equipment purchases, which must be in accordance with the franchise package specifications – hiring contractors for construction and remodeling may be a possibility.
Working capital: money you’ll need to survive the initial start-up phase. This money covers expenses such as training and payroll until the business begins to turn a profit.- Continuing fees: royalties, management service fees, advertising and marketing fees, etc.
The FDD is a comprehensive document that covers all aspects of the franchise you are planning to open. It is an invaluable reference for all potential franchisors on their quest to franchise ownership, and should be reviewed very carefully with legal counsel. A franchisor is required to provide their FDD to prospective franchisees at least 10 days before a sale is completed and the franchise agreement is signed. Because the Federal Trade Commission (FTC) regulates franchise agreements, the FDD must conform to FTC requirements about business disclosures. In addition, some states also require franchises to be registered and approved by the state.
Here are some charts with examples of estimated initial investments for selected franchises.
HouseMaster Home Inspections
| Type of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $39,500 | $39,500 |
| Training Expenses (travel and lodging) | $500 | $3,000 |
| Supplies (Equipment, Marketing and Inspector related Materials) | $3,000 | $6,000 |
| Office Equipment and Furniture | $0 | $2,000 |
| Computer System | $0 | $4,700 |
| Rent | $0 | $750 |
| Prepaid Expenses | $250 | $2,500 |
| General Liability Insurance | $500 | $2,500 |
| Errors & Omissions Insurance | $2,500 | $3,500 |
| Legal Services | $1,000 | $2,500 |
| HouseMaster® Manual Deposit | $250 | $250 |
| First Year Conference Travel Expenses | $1,000 | $3,000 |
| Additional Funds (3 months) | $6,000 | $11,000 |
| Total Estimated Initial Investment | $54,500 | $81,200 |
Dunkin’ Donuts
| Type of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $40,000 | $80,000 |
| Building Costs | $190,000 | $350,000 |
| Site Development Costs | $0 | $10,000 |
| Additional Development Costs | $22,000 | $75,000 |
| Equipment, Fixtures and Signs | $300,000 | $450,000 |
| Electronic Cash Register/Retail Info Systems | $16,050 | $23,550 |
| Opening Inventory | $7,000 | $15,000 |
| Miscellaneous Opening Costs | $16,800 | $68,100 |
| Licenses, Permits, Fees and Deposits | $3,500 | $5,500 |
| Uniforms | $400 | $1,200 |
| Insurance | $4,500 | $15,000 |
| Travel and Living Expenses While Training | $2,000 | $45,000 |
| Marketing Start-Up Fee | $5,000 | $7,500 |
| Additional Funds (3 months of operation) | $81,000 | $184,000 |
| Total Estimated Initial Investment | $688,250 | $1,329,850 |
Dunkin’ Donuts —Manufacturing retail/Free-Standing Store
| Type of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $40,000 | $80,000 |
| Building Costs | $310,000 | $530,000 |
| Site Development Costs | $150,000 | $200,000 |
| Additional Development Costs | $55,000 | $75,000 |
| Equipment, Fixtures and Signs | $300,000 | $450,000 |
| Electronic Cash Register/Retail Info Systems | $16,050 | $23,550 |
| Opening Inventory | $7,000 | $15,000 |
| Miscellaneous Opening Costs | $16,800 | $68,100 |
| Licenses, Permits, Fees and Deposits | $3,500 | $5,500 |
| Uniforms | $400 | $1,200 |
| Insurance | $4,500 | $15,000 |
| Travel and Living Expenses While Training | $2,000 | $45,000 |
| Marketing Start-Up Fee | $5,000 | $7,500 |
| Additional Funds (3 months of operation) | $81,000 | $184,000 |
| Total Estimated Initial Investment | $991,250 | $1,699,850 |
Dunkin’ Donuts —Satellite/In-line store
| Type of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $40,000 | $80,000 |
| Building Costs | $125,000 | $295,000 |
| Site Development Costs | $0 | $10,000 |
| Additional Development Costs | $55,000 | $75,000 |
| Equipment, Fixtures and Signs | $150,000 | $250,000 |
| Electronic Cash Register/Retail Info Systems | $16,050 | $23,550 |
| Opening Inventory | $3,000 | $10,000 |
| Miscellaneous Opening Costs | $16,800 | $68,100 |
| Licenses, Permits, Fees and Deposits | $3,500 | $5,500 |
| Uniforms | $400 | $1,200 |
| Insurance | $4,500 | $15,000 |
| Travel and Living Expenses While Training | $2,000 | $45,000 |
| Marketing Start-Up Fee | $5,000 | $7,500 |
| Additional Funds (3 months of operation) | $81,000 | $184,000 |
| Total Estimated Initial Investment | $502,250 | $1,069,850 |
Dunkin’ Donuts —Satellite/Free-Standing
| Type of Fee | Low | High |
|---|---|---|
| Initial Franchise Fee | $40,000 | $80,000 |
| Building Costs | $275,000 | $430,000 |
| Site Development Costs | $150,000 | $250,000 |
| Additional Development Costs | $75,000 | $95,000 |
| Equipment, Fixtures and Signs | $150,000 | $250,000 |
| Electronic Cash Register/Retail Info Systems | $16,050 | $23,550 |
| Opening Inventory | $3,000 | $10,000 |
| Miscellaneous Opening Costs | $16,800 | $68,100 |
| Licenses, Permits, Fees and Deposits | $3,500 | $5,500 |
| Uniforms | $400 | $1,200 |
| Insurance | $4,500 | $15,000 |
| Travel and Living Expenses While Training | $2,000 | $45,000 |
| Marketing Start-Up Fee | $5,000 | $7,500 |
| Additional Funds (3 months of operation) | $81,000 | $184,000 |
| Total Estimated Initial Investment | $822,250 | $1,464,850 |
CMIT Solutions
| Type of Fee | Amount |
|---|---|
| Initial Investment | $44,950 plus $10,000 for territory fee |
| Furniture & Equipment | $0 - $4,000 |
| Advertising & Marketing | $14,000 for 6 months |
| Technical Staffing | $12,000 for 6 months |
| Start-Up Supplies | $25,000 - $35,000 |
| Total Estimated Initial Investment | $99,800 - $125,950 |
CMIT Solutions – Area Development
| Type of Fee | Amount |
|---|---|
| Area Development Fee | $150,000 - $200,000 |
| Travel Food & Lodging While Training | $1,000 - $2,000 |
| Real Estate | Depend on Area/Size |
| Furniture & Equipment | $0 - $5,000 |
| Advertising & Marketing | $6,000 ($2,000 per month) |
| Start-Up Supplies | $1,000 - $2,000 |
| Business Working Capital | $10,000 - $25,000 |
| Total Estimated Initial Investment | $54,500 |
*All information contained in the above charts has been taken from the FDDs of the respective companies.
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