Analysis of the Initial Franchise Fee and Estimated Initial Investment will play a critical role in any prospective franchisee’s due diligence. Franchisors need to pay close attention that their investment range, coupled with unit economics, are within industry standards.
FranchiseGrade.com has calculated the average Item 5 Initial Franchise Fee and Item 7 Estimated Initial Investment for each sector in the franchise industry based on a sample of 2000 franchise systems.
There are minimal differences between franchise sectors within Item 5 Initial Franchise Fees. This is in contrast to Item 7 Estimated Initial Investment.
|Initial Franchise Fee||Minimum||Maximum|
|Commercial & Residential Services||$27,367||$44,854|
|Quick Service Restaurants||$31,086||$39,781|
|Retail Products & Services||$25,238||$40,030|
|Estimated Initial Investment||Minimum||Maximum|
|Commercial & Residential Services||$79,126||$183,405|
|Quick Service Restaurants||$276,658||$710,211|
|Retail Products & Services||$194,816||$537,130|
We have completed a study on the changes in Ongoing Fees in the franchise industry using our data from 2013 – 2016 to publish the report.
A Franchise Disclosure Document (“FDD”) presents key components of the franchise program including the obligations of the franchisor and franchisees.
As franchise system development becomes more competitive franchise systems are employing a new strategy to grow their brand and increase franchise sales.
The composition of the franchise investment differs in key areas such as: franchise fees, royalty rates, territory protections and Item 19 disclosures.
Data has become essential to having a successful franchise development team. Those that maximize the power of data will sell more franchises.
When reviewing an FDD, we always keep our eyes out for any errors. The error that is the most troublesome for us is when we see Item 20 errors.