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Initial Costs of Opening a Franchise

Initial Costs of Opening a Franchise

The Franchise Disclosure Document (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 franchisees on their quest to franchise ownership, and should be reviewed carefully with legal counsel.


Franchisors are required to provide their FDD to prospective franchisees at least 10 days before a sale is completed and the franchise agreement is signed. All FDDs must conform to Federal Trade Commission (FTC) requirements regarding business disclosures. Some states also require franchises to be registered and approved by the state.


The initial investment for opening a franchise is detailed in your prospective franchisor’s FDD in Items 5 and 7. These costs commonly include:

    Financing Franchise
  • Initial Franchise Fee: Cost paid to the franchisor in exchange for the right to use the franchisor’s brand, trademarks, service marks and business system
  • Training: Expenses related to attending the training session of the franchisor, not including the actual training session(s), such as airfare, hotel, food and other living expenses paid while attending training session(s)
  • Leasehold Improvements: Expenses for any necessary renovations to prepare property for grand opening
  • Real Estate: Due to varying markets, Franchise Disclosure Documents do not always specify real estate costs such as land/building purchase or leasing/rent costs and some franchise systems involve work-from-home or mobile opportunities where office space isn’t required
  • Equipment: Some franchisors require that a franchisee purchase certain products or services either from the franchisor or from affiliates, and costs vary
  • Professional Fees: Costs can include legal services, accounting services, and business licenses to ensure compliance with local regulations
  • Advertising/Marketing: Costs associated with start-up promotion efforts
  • Working Capital: Often called “additional funds,” to cover expenses for a typical three months until franchise begins to turn a profit, which may include franchisee living or business related expenses

MoneyInitial investment widely varies and geographic location, industry and the particular franchise system often affect costs. For illustration, below are three estimated average initial franchise investment costs. The examples are from different industries to better display investment variability between industries and are based on the 2012 FDDs of the respective companies.


Lil' Angels Photography

Name of Fee Low Estimate
High Estimate
Initial Franchise Fee $35,000 $35,000
Equipment and Supplies (plus applicable taxes and shipping costs)
$10,000 $10,000
Travel and Living Expenses for the Franchisee and Employees During Training $500 $1,000
Credit Card Machine $0 $1,200
Deposits and Licenses $100 $500
Miscellaneous Opening Costs $500 $1,000
Additional Funds - Initial Period $600 $2,500
ESTIMATED TOTAL $46,700 $51,200


Real Property Management

Name of Fee Low Estimate
High Estimate
Franchise Fee $20,000 $30,000
Real Estate/Rent $500 $5,000
Utility Deposits $100 $300
Leasehold Improvements $0 $1,000
Insurance $500 $2,000
Office Equipment and Supplies $1,500 $2,500
Training $1,000 $2,000
Signage $200 $1,000
Furniture, Fixtures and Equipment $500 $2,000
Real Propertyware Software $300 $300
Licenses and Permits $500 $1,000
Legal and Accounting $250 $1,000
Dues and Subscriptions $100 $200
Additional Funds (3 months) $15,000 $25,000
BackOffice Bookkeeping Assistance Program $100 $100
$40,550 $73,400


Subway (Traditional Location)

Name of Fee Low Estimate
High Estimate
Initial Franchise Fee $15,000 $15,000
Real Property $2,000 $12,000
Leasehold Improvements $59,500 $134,500
Equpiment Lease Security Deposit $4,500 $7,500
Optional Security System $2,000 $6,000
Freight Charges $3,000 $4,500
Outside Signage $2,000 $8,000
Opening Inventory $4,400 $6,050
Insurance $800 $3,500
Supplies $500 $1,300
Training Expenses (including travel and lodging) $2,500 $4,500
Legal and Accounting $1,000 $3,500
Opening Advertising $2,500 $4,000
Miscellaneous Expenses $4,000 $8,000
Additional Funds - 3 months $12,000 $42,000
$115,700 $260,350


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