What Are the Upfront Costs Associated with Buying a Franchise?

September 20, 2018 Paul Henshall Buying a franchise

 

Franchising is big business for Australia and New Zealand’s budding entrepreneurs. Did you know Australia has three times more franchise outlets per capita than the US? In fact, Australia has 79,000 franchised outlets, which total an annual turnover of more than $146 billion. Did you also know that New Zealand is the most franchised country per capita in the world? Safe to say, buying a franchise is an excellent business investment for those who are looking for a career and lifestyle change. However, it is not uncommon for aspiring entrepreneurs to be hesitant about franchising, mainly because of the often-times hefty upfront investment associated with buying a franchise. In this article, we will be looking at exactly what you can expect to pay upfront when buying a franchise (and we think you’ll find it’s not as bad you thought).

 

The Upfront Costs of Buying a Franchise

Depending on the industry and type of franchise you decide to invest into, the upfront costs can greatly vary. Upfront fees can range from as little as $5,000 to as much as $1 million or more.That’s why before you begin looking into buying a franchise, you should know how much capital you have to invest. This allows you to have a realistic view on the types of industries and brands you should be considering. 

Let’s look at a few examples of the upfront costs associated with buying a franchise, as revealed on Franchising.com. For a home-based franchise, you might be looking at upfront fees of $10,000 or less. On the other end of the scale, buying into a hotel franchise can cost you upwards of $5 million. Fast food restaurants may cost anywhere from $250,0000 to $1 million, while auto repair franchises will cost around $200,000. Of course it’s important to remember these are averages and the true cost of entry will greatly depend on the brand.

 

The Ongoing Cost of Running a Franchise

After paying an upfront investment fee, franchisors will also typically either directly or indirectly collect ongoing payments also known as royalties from their franchise partners. This is usually a fixed monthly fee or a percentage of turnover.

It’s also important to know that there are often two different types of royalties a franchise partner needs to pay a franchisor. The franchise fee royalty, is a royalty that gives the franchise partner the right to use the brand name as well as the systems and intellectual property. Then there is an advertising fee also known as a marketing royalty, marketing royalties are fees franchise partners pay into a national fund for common branding and advertising initiatives done for the franchise on a regional or national level. 

Most franchises that sell products will then also require the purchase of certain required products to be strictly purchased either from the franchisor or from a preferred supplier/affiliate of the franchise. If the franchise you are investigating has a preferred supplier, it’s important to investigate whether their pricing is competitive with the industry.

 

Case Study: Upfront Costs of Buying an ActionCOACH Franchise

The thing to remember is when you invest in a franchise, what you’re really doing is making an investment in yourself. While the upfront fees may seem like a lot, in reality you’re setting yourself up for a highly successful and empowering career. Take investing in ActionCOACH for example. ActionCOACH is the largest business coaching franchise in the world and one of the most successful due to the fact we’ve had more than 24 years to develop a business coaching model that guarantees results.

The upfront costs associated with buying an ActionCOACH franchise includes everything you’ll need to run your business. This investment includes a huge array of powerful and educational tools that will not only kick-start your business, but also teach you how to be successful in life. Your upfront fee also includes a 4 week induction training program, an in-depth 7-day live-in training program, as well as 12 week post training program which will teach you everything you need to know about using the unique ActionCOACH system and how to market and sell your services to clients. 

When you invest in the ActionCOACH system, you’re buying the rights to operate an ActionCOACH Business Coaching business as well as all the proven tools, systems and methodologies you need to coach your clients. You are also investing in your own training and up-skilling as you will learn everything you need to know about business coaching, including sales, marketing and how to be the most successful business coach. Furthermore, you receive your own personal success coach and will have access to a global support group of other coaches.

Investing in an ActionCOACH Business Coaching franchise is not only about investing into a successful and profitable business, you are also investing in your own personal and professional growth and development as well as the opportunity to change the lives of those business owners and their employees in your community.

Whether you want to be a single practice owner or build a business coaching firm there are at least 3 different models in which you can become an ActionCOACH business coach and franchise partner. If you are interested in becoming an ActionCOACH complete the form below and your local area manager will contact you to provide you with more information as well as the upfront and ongoing fees you need to be aware of when becoming an ActionCOACH franchise partner.

We hope you have found this article helpful in understanding the upfront costs associated with buying a franchise. At the end of the day, every franchise across Australia and New Zealand is different, so it’s important you do some research to find the right fit for you.

Action Coach Information Brochure