Average Franchise Fees In 2025: A Franzy Study

Investing in a franchise is a smart move for any aspiring or established entrepreneur. Instead of starting from scratch, you can capitalize on a tried and trusted business model. However, purchasing a franchise can be an expensive endeavor, particularly when you’re just starting out. Moreover, you might not see a return on your investment for a couple of years. 

It’s important to understand the different fees associated with buying a franchise before you make a purchase. Below, I’ll discuss some of the average franchise fees and other costs associated with franchising.

Key Takeaways

• Initial franchise fees typically range from $20,000 to $50,000, depending on the franchise.
• Certain industries, such as hotels, may have higher franchise fees, sometimes exceeding $75,000 or $500 per room.
• Some franchises, like Chick-fil-A, offer lower initial franchise fees compared to the industry average.
• It’s important to consider additional costs beyond the initial franchise fee, such as ongoing royalties and operational expenses.

How Much Are Franchise Fees on Average In 2025?

Wondering how much it’ll cost to open a franchise? Unfortunately, there is no one-size-fits-all answer to this question. Prices can range from $10,000 on the low end to millions of dollars depending on the business and expected profits. In most cases, that total figure includes fees such as:

• Initial franchise fee
• Initial advertising fees
• Real estate
• Insurance
• Hiring staff
• Inventory
• Supplies

Now, let’s dive into each of those fees in detail.

Initial Franchise Fee

One of the most significant costs associated with investing in a franchise is the Initial Franchise Fee. At the minimum, paying the franchise fee will give you the right to use your franchisor’s brand and trademarks. Often, this fee also covers initial training and support, access to proprietary business systems such as internal processes and the use of technology, and operational guidelines. The Initial Franchise Fee might also include some initial marketing and advertising to help get your new branch off the ground.

Generally speaking, the initial franchise fee costs between $20,000 and $50,000 – though it can be much higher than that, depending on which franchise you wish to invest in. For example, the average franchise fee for a McDonald’s is around $45,000, though the full cost of purchasing franchise rights and equipment is a minimum of $630,000.

On the other hand, you might be able to pay less than $20,000 on the initial fee for a home-based or hybrid-model franchise.

Initial Fees for Popular Franchises

• UPS Store: $29,950
• McDonald’s: $45,000
• Clean Eatz: $49,500
• Gatsby Glass: $59,500
• Dermani MEDSPA: $55,000

Advertising Fees

Among the many benefits of becoming a franchisee is the fact that advertising and marketing are, for the most part, taken care of by your franchisor. Provided you invest in a reputable franchise, you’ll have to do very little to ensure your brand name remains alive in the minds of consumers. However, you will likely have to contribute a percentage of your sales or profits to your franchisor’s advertising fund. Usually, that figure is between 1% and 4% of your net sales.

Advertising Fees for Popular Franchises:

• UPS Store: 2.5%
• McDonald’s: 4% 
• Clean Eatz: 2%
• Gatsby Glass: 3%
• Dermani MEDSPA: .25%

Franchise Renewal Fee

A shocking reality for many franchisees is that the franchise agreement is not permanent. Most franchise agreements last for between 10 and 20 years, after which you may be required to pay a renewal fee to secure a new franchise term. In some cases, the renewal fee is the same as the initial franchise fee. But more commonly, you’ll pay a percentage of the initial fee.

It’s worth noting that not all franchisors charge a renewal fee.

According to the National Federation of Independent Businesses, over 30% of franchisors don’t charge a renewal fee. Still, as most do, you should be aware of this cost when entering into a franchise agreement. Your initial franchise agreement should state what this fee will be. It should also contain details of any fees associated with transferring the ownership of your franchise to a new franchisee.

Other Costs to Consider as a Franchise Owner

I hate to break it to you, but there are far more costs associated with franchising than the initial franchise fee and marketing expenses. Let’s look at some other expenses you should be prepared for as a new franchise owner and how that adds to your total cost to buy a franchise.

Royalty Fees

Before purchasing your first franchise, you need to be aware of your royalty payments, which is the main way the franchisor makes a profit from your franchise. You’ll usually be charged a fixed percentage fee on either your gross profits or total revenue. These franchise fees vary, but you can typically expect to pay between 4% and 9% of your gross sales. In some cases, this figure can be as low as 1% or as high as 50%, depending on the business and the industry. 

Royalty Fees for Popular Franchises

Here are the royalty fees at some of the most popular franchises for 2024:

• UPS Store: 5%
• McDonald’s: 5%
• Chik-Fil-A:  15%
• Clean Eatz: 6%
• Gatsby Glass: 8.5%
• Dermani MEDSPA: 5%

Real Estate or Leasing Property

Naturally, one of the heftiest costs when opening a new franchise is the cost of renting or purchasing real estate for the business. Although your franchisor will provide support in selecting a site, they’ll also make sure you choose a location that meets their high expectations – and this can be costly.

For example, the rent fee at a typical McDonald’s restaurant swallows up between 8% and 18% of its net sales. 

Purchasing Insurance

Business insurance is an absolute necessity for any prospective franchisee. In fact, most franchise agreements will state the minimum level of cover you must obtain, though purchasing a comprehensive package can be a wise move. After all, predicting disasters can be next to impossible, and it’s always better to be safe than sorry.

In most cases, franchise insurance covers:

• Equipment breakdown coverage
• General liability coverage 
• Property damage
• Business interruption
• Workers’ compensation (which covers some or all of your workers’ wages if they become injured or sick while at work)
• Commercial auto liability coverage
• Excess liability coverage
• Retail insurance

Nowadays, many franchise insurance agreements also include cyber liability insurance, which is becoming increasingly crucial in a world where malware attacks, data breaches, and other cyberattacks are on the rise – and becoming increasingly sophisticated.

As with just about anything, franchise insurance costs vary. Factors that can affect the cost of franchise insurance include the number of employees you hire, your revenue, location, number of business-owned vehicles, history of claims, and your industry. According to Insureon, general liability insurance can cost as little as $42 per month, works comp can be grabbed for as little as $45 per employee per month, and liability coverage will set you back at least $61 per month.

Bear in mind that those costs are at the minimum. Be prepared to pay much higher premiums for a highly profitable franchise.

Hiring Staff

Wages alone will eat into a fair share of your revenue, but that doesn’t factor in the cost of hiring employees in the first place. If you only need a team of unskilled workers to serve customers, you might be able to keep your recruitment costs to a minimum. However, if you need skilled workers, you might have to work with a recruitment agency. In many cases, these recruitment agencies take payment in the form of a percentage of each procured employee’s wages, sometimes up to 30% of the employee’s starting salary.

In the USA, it costs an average of $4,700 to hire a single employee. This fee may include costs associated with:

• Candidate screening and background checks
• HR team efforts
• Training
• External recruiters
• Job ad fees
• IT equipment
• Employment taxes
• Signing bonuses

The longer it takes to recruit and hire an employee, the higher the costs will likely be. 

Inventory

As part of their franchise agreements, many franchisors insist that the franchisee purchase inventory and supplies from them rather than an alternative supplier. The costs associated with purchasing inventory can vary wildly depending on your industry. However, franchisors often charge more for raw materials that could be purchased cheaper elsewhere. While this ensures that you continue to supply your customers with the quality products they demand, it can eat into your revenue. For example, it’s not uncommon for fast food franchises to charge 5-10% above the prevailing market value for supplies.

You may also need to pay a down payment for inventory when starting out. If you open a 7-Eleven store, for example, you’ll need to spend at least $20,000 on opening inventory.

Equipment

In addition to inventory, you may need to cough up a fair sum to procure all the equipment you need to get up and running. In most cases, you’ll pay a flat initial fee to purchase or lease the equipment from your franchisor. The cost of equipment can vary significantly depending on your industry. For example, you’ll need a down payment of around $1,000 for the equipment to franchise a 7-Eleven store.

Working Capital

Last but not least, you’ll probably be expected to have access to your own unencumbered funds to start a franchise. Many franchisors put a cap on how much of the franchise can be financed by a third party, such as a bank. For example, if you were to open a McDonald’s, you’d typically be required to invest $500,000 of unborrowed money into the company.

This demonstrates that you have access to liquid funds that can be used to cover any regular day-to-day expenses that may arise within your franchise.

Transparency With Your Franchise Fees with Franzy

Franchising is a proven pathway to business ownership. That said, franchising involves many different fees, and it is important to have a strong understanding of them before diving in. Armed with the knowledge I have just provided you with, you can make informed, data-driven decisions and budget effectively for your franchise venture.

Ready to dive deeper into the world of franchising? Franzy is your ultimate resource for researching franchise opportunities, comparing costs, discovering trends, and connecting with industry leaders. Whether you’re a first-time entrepreneur or looking to expand, Franzy has the tools to guide your journey.