What does it cost to be a franchisee ?

The questions and myths around franchising are very present in the heads of entrepreneurs. Would-be entrepreneurs dream of creating a brand with the potential of launching a franchise, while others are interested in becoming franchisees. The question of the costs attached to the franchising concepts are however difficult to answer. Except if you take the time to do some market research and compare a 13 brands as we did below.

 13 brands compared

We decided to compare 13 brands for which we had data :

• Chocolate brands : Monbana, Jeff de Bruges
• Coffee and bars : Au bureau, Café Leffe, Irish Corner
• Bakeries : La Mie Câline, Fournil des Provinces, Histoire de Pains
• Windows and frames : Tryba
• Restaurant and pizza : Courtepaille, Baila Pizza
• Frozen yogurts : Tutti Frutti
• Wine : Cavavin

Criteria used

We compared some basic data such as the duration of the initial contract, the one-time fee to enter the franchise (fixed costs), royalties and participation to advertising expenses, the size of the store, total budget and own contribution, etc …

Results

Results vary greatly from one brand to the other. Not illogically the greatest variation is observed between categories. The food and drink brands in our panel follow more or less the same structure whereas the only brand in a different brand (Tryba) has a different approach (no initial fee required) and a low percentage on material (3%). This is actually due to the fact that a franchisee will have to buy all the material from Tryba and that the brand will sell it with a profit. No need thus to make more money on it; the economies of scale leveraged through additional sales point are also to the advantage of the brand.

As far as the food and drink sector is concerned, we observe also large variations. The initial fee to enter the franchise ranges from 21000€ (Jeff De Bruges) up to 47000€ (Au Bureau, Café Leffe, …) and the royalties from nothing (Jeff De Bruges) up to 6% of the annual revenues (Tutti Frutti, Fournil des Provinces), the average being around 4-5%. Some brands also ask for fees to cover marketing and advertising expenses. Here again they can be as low as … 0% (Cavavin, La Mie Câline) and can go up to 2%.

Conclusion

All in all royalties and miscellaneous fees related to the franchise can account for as much as 10% of your yearly revenues. It’s important to take everything into account and comparing well the different franchising concepts before signing a contract. If you hesitate or don’t know how to handle those aspects, don’t hesitate to contact us.

Detailed comparison of franchising  concepts