You are passionate about food and you know you have a lot to offer to the food and beverage industry. In addition, the idea of running your own restaurant or food franchise sounds exciting and just the right step in your career. It, therefore, makes sense to be considering a franchise opportunity in the form of a new restaurant Downtown, an ice cream parlor in a mall, or a fast food franchise on the East Coast.
However, if you are concerned that the franchise fee or net worth requirements to start a food franchise might just be too much for you, you don’t have to worry. There are many cheap restaurant franchises available with low startup costs and great support from the parent company for you to easily find the right franchise for you.
This article will help you understand the various franchise costs in the restaurant industry and navigate through your options before becoming a food franchise owner.
What Are The Franchise Fees
Initial Franchise Fee
The franchise fee is a lump sum paid to the franchisor, or parent company when a contract is signed. The initial franchise fee is paid right at the start of the agreement in order to establish the franchise relationship and for the franchisee to receive the initial services agreed upon, such as training, materials for marketing support, and any other branding collateral needed.
Although the franchise fee can vary between franchisors, some offering a lower franchise fee than others, it is still one of the key areas used to attract investors and is generally kept at a low cost. When buying a franchise from other franchise owners, this one-off fee will appear as a transfer fee, and similarly, upon renewal of your franchise agreement, you will have to pay a renewal fee. These are all typically fixed but there might be rare cases where the franchise fee can be negotiable.
These are monthly fees paid to the franchisor and are based on a percentage of the gross sales of your franchise. For most restaurant franchises, the royalty fee can range from 4% up to 12% in some cases. In many franchises, this fee will earn you ongoing support for your business, such as marketing support and collateral.
Although most commonly, this fee is based on your gross sales, it does differ between each franchise and can also be based on revenue or pretax profit.
Also based on your gross sales, the advertising fee is an ongoing fee to the franchisor and tends to be a lower percentage than the royalty fee. This will ensure the parent company is advertising your location and services on their main website and promoting your business through their network.
Other Franchise Costs
Once you have paid your initial franchise fee and have completed the franchise training, you are ready to start treating it like the business you want it to be. From now on, your main costs will be running costs associated with your physical franchise locations, equipment, and staff.
Startup costs will include rental of a location, buying equipment and interior fittings for the business, and additional sales and marketing efforts that all add up to the total starting capital. It will be up to you to keep a low cost. The ongoing costs will include monthly rent, utilities and cooking or cleaning supplies, employee salaries, and equipment maintenance.
Top 10 Cheap Restaurant Franchises
1. Baskin Robbins
Baskin-Robbins is a leader amongst the ice cream franchises with a business model that has been proven successful in more than 7,700 shops in 52 countries. When you franchise with Baskin-Robbins, you are joining a world-known brand and a global network of like-minded franchise experts.
Five Reasons Baskin-Robbins Franchises are Inexpensive:
1. No expensive up-front franchise fee
You might even think “Why so low?” After all, they are popular and well-known brand. However, due to its relatively easy-to-operate, solid business model in place and proven track record making Baskin-Robbins’ initial franchise fees so affordable.
2. Low monthly royalty fees.
One of their defining achievements is their low current royalty fee: 4.5% of gross sales. This allows franchisees to invest more money in other areas vital for the business such as marketing and employee training while still maintaining a good profit margin. In fact, most profits can be reinvested back into improving the franchise or expanding its operations.
4. Advertising fees are also based on gross sales
This fast food chain franchise departed from the norm by charging a flat fee for advertising based on gross sales instead of basing its fees on the percentage of sales.
5. Franchisees can negotiate the initial franchise fee
While the company does have a standard fee, franchisees can often get a discount by negotiating with the company. This is especially true if the franchisee is willing to open their store in a location that is underserved by Baskin-Robbins.
2. Cold Stone Creamery
Cold Stone Creamery is one of the cheapest but most promising food franchises in the world. Named a “bright star” in the $8 billion ice cream US market, it is a brand that is rapidly expanding both in the US and Internationally. One of the key differentiators of the company is that they provide incredible support to their franchisees making sure they are well prepared for success.
Reasons why it is one of the cheap restaurant franchises?
The Chick-Fil-A franchise has more than 2,000 restaurants and is popular in the US chain restaurant industry. They serve their signature hand-breaded chicken sandwiches and hot waffle fries. And also, is genuine hospitality, run by carefully selected franchise owners who are passionate about building their businesses and community.
The company told Business Insider that they ask for only $10,000 from those wanting to open a new restaurant franchise opportunity. Net worth or liquid capital are not required amount that candidates must meet.
Why Chick-Fil-A has Low Total Initial Investment Fees
4. Chester’s Chicken
Chester’s has 1200 locations across the United States and offers up fried chicken with a unique flavor that’ll keep you coming back for more. Not to mention, it’s also handy as it can be found in convenience stores, supermarkets, and even on college campuses!
Founded way back in 1952 by none other than Chester P. Chapman himself, this franchise shows no signs of slowing down any time soon-in fact; they’ve been featured on multiple TV shows such as magazines and have even earned themselves a spot as one of Entrepreneur magazine’s “100 Hot Brands.”
Why is Chester’s HAs Low total Initial investment
There are no royalty fees for Chester’s franchise.
5. Firehouse Subs
Firehouse Subs is an excellent choice for those interested in investing in a franchise. Not only does the company offer quality ingredients and great relationships with their franchisees, but it also has a strong commitment to community involvement.
This makes Firehouse Subs the perfect option for anyone who wants to make a positive difference in their community.
Why it is one of the cheap restaurant franchises?
Although a Firehouse Subs franchise is one of the cheapest food franchise opportunities, you will still need to put in the effort to make your business successful.
Apart from that, you’ll need to pass the financial qualifications that include, liquid assets, and net worth.
If you’re looking for a popular franchise to invest in, Quizno’s is a great option. The company started franchising in 1981 and has grown rapidly ever since. Today, there are over 5,000 Quizno’s locations across the United States.
Quizno’s provides everything you need to get your business up and running quickly and efficiently. Their comprehensive franchise system includes all the resources you need to succeed as a franchisee.
Why Quizno’s is affordable to own?
This is because Quizno’s has a lower overhead cost.
For example, they require less square footage than most franchises, which means that Quizno’s can get away with paying less rent.
This franchise business has fewer employees than other franchises,…
which cuts down on labor costs. As a result, Quizno’s is able to pass on these savings to its franchisees in the form of lower franchise fees.
Low ongoing fees
The royalty fee of 5% of gross sales, and the advertising fee of 2% of gross sales.
7. Taco Bell
Taco Bell is one of the most successful fast food chains in the US serving customers their favorite Mexican fast food for more than 60 years and in more than 7,000 locations. Although on the higher end of food franchises in terms of costs, the franchise itself has approachable fees, high-quality ongoing support, and an unbeatable brand following.
However, a potential franchisee should be able to pass the financial requirements, which include having liquid assets and net worth.
Why It is One of the cheap restaurant franchises
There are a few key factors that play into this.
8. Mucho Burrito
This up-and-coming Mexican Burrito franchise is making its way from Canada to the US and it’s doing it big. As an entirely new brand in the US market, offering a premium burrito experience at a low cost for franchisees and exceptional brand management support, it is definitely one of the most exciting food franchises to look out for.
Why it is a Cheapest food franchise opportunity
9. Papa John’s
Who doesn’t know Papa John’s Pizza? It is one of the most iconic pizza brands and restaurant franchises in the world. When you think that they carefully select their franchisees based on management experience, net worth, and commitment (they prefer multi-unit franchise owners), it should not come as a surprise that they deliver consistent quality and achieve strong brand loyalty.
Why Papa John’s is one of the cheap restaurant franchises?
Papa John’s royalty fees stand at 5% of net sales for traditional restaurants and 6% for non-traditional small-town businesses. For online orders, there is a transaction fee of 1.75% of net sales. There is also a $240 fee per month for access and maintenance of the franchise system.
10. Scooter’s Coffee
Scooter’s Coffee offers a unique, low-cost, drive-thru business model for coffee lovers in almost 500 locations across the nation. They are selective when it comes to building new franchise relationships and this translates to their exceptional service based on a team full of management experience.
Why low total initial investment ranges
Running a restaurant franchise is definitely not for the faint-hearted and requires someone dedicated and experienced in managing a fast-paced, exciting, and innovative service. If you are that person and are ready to take on the industry, look no further.
Launching your own business doesn’t have to be expensive, and these cost-effective restaurant franchises are ideal for you. To learn more about franchising, a franchise consultant will assist you throughout the entire process.