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CategoryFranchise investment costs
Initial investment, available capital, expenses and other associated costs: how to read them and how to plan for them.
Line items of the initial investment
| Item | What it includes | When it is paid |
|---|---|---|
| Franchise fee | The right to use the brand and system. | When signing the agreement. |
| Location | Deposit, initial rent and build-out. | Before opening. |
| Equipment and inventory | Machinery, furniture, technology and opening inventory. | Before opening. |
| Training | Training, travel and lodging. | Before opening. |
| Permits and insurance | Local licenses, policies and professional fees. | Before and during opening. |
| Working capital | Operating expenses for the first months. | During the first 3 to 6 months, or as the brand indicates. |
Official sources: FTC – Franchise Rule · FTC – A Consumer’s Guide to Buying a Franchise
What you will pay every month
- Royalties: usually a percentage of gross sales.
- Marketing fund: a contribution to brand advertising.
- Technology: software, point of sale and platforms.
- Your own operating costs: payroll, rent, utilities, supplies and taxes.
How to plan your budget
Use the high end
Plan with the highest Item 7 figure so you don’t fall short.
Add a cushion
Set aside an extra margin for surprises and delays.
Validate with an accountant
Build your own projections based on real data.
How to read franchise costs in the FDD
Total franchise costs go beyond the initial fee. In the Franchise Disclosure Document (FDD), Item 5 details the initial fees paid to the franchisor and Item 7 presents the estimated initial investment: premises, build-out, equipment, inventory, insurance, licenses, training and working capital for the first months. Item 6 lists recurring payments, such as royalties and advertising fund contributions.
Item 7 figures are usually shown as a range, because they depend on the city, the size of the premises and the lease terms. That is why it pays to prepare your own budget with an extra margin for unexpected costs and to validate the numbers with franchisees who already operate the brand. If the franchisor includes financial performance representations, they will appear in Item 19; if it does not, it cannot make earnings promises outside the FDD.
If you also plan to apply for an E-2 visa, the capital must be committed and at risk, and proportional to the total cost of the business. An FBA certified franchise broker helps you compare brands within your investment range, without promising profitability.
Sources consulted
Data checked in October 2026. Rules and requirements may change: always confirm current information with the official sources.
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