Franchise Strategies
Aug 1, 2025
Explore the diverse franchise fees by industry in 2025, highlighting key costs, royalties, and support systems across various sectors.
Franchise fees in 2025 differ widely based on the industry, brand reputation, and business model. Here’s a quick breakdown of key costs across major sectors:
Quick-Service Restaurants (QSRs): Initial fees range from $6,250 to $90,000. Royalties are 4%-8% of gross sales, with marketing fees between 1%-5%.
Retail: Initial fees fall between $10,000 and $50,000, with total investments often exceeding $100,000. Royalties range from 4%-12%.
Health & Fitness: Fees vary significantly, from under $25,000 for budget gyms to over $250,000 for premium brands. Royalties typically hover around 6%.
Hospitality: Initial fees span $10,000 to $150,500, with total investments for hotels starting at $4 million. Royalties are 5%-6%.
Professional Services: Lower entry costs, with fees from $20,000 to $50,000. Royalties are higher, often 8%-12%.
Home-Based Businesses: Affordable, with fees as low as $695 and rarely exceeding $34,500. Royalties range from 4%-12%.
Quick Comparison
Industry | Initial Fee Range | Royalty Fees | Marketing Fees | Key Notes |
|---|---|---|---|---|
Quick-Service Restaurants | $6,250 - $90,000 | 4% - 8% | 1% - 5% | High demand, strict operational guidelines. |
Retail | $10,000 - $50,000 | 4% - 12% | 2% - 3.5% | Capital-intensive with higher real estate and staffing costs. |
Health & Fitness | <$25,000 - $250,000+ | ~6% | ~4% | Membership-driven revenue; equipment and facility costs vary widely. |
Hospitality | $10,000 - $150,500 | 5% - 6% | 2.5% - 4.5% | High startup costs, diversified revenue streams (e.g., food, events). |
Professional Services | $20,000 - $50,000 | 8% - 12% | Varies | Lower overhead, specialized skill requirements, scalable business models. |
Home-Based Businesses | $695 - $34,500 | 4% - 12% | Focused on digital | Low startup costs, flexible operations, fewer resources than physical setups. |
Franchise fees are just one part of the equation. Consider total investment, recurring costs, and the level of support provided when evaluating opportunities. High-cost franchises often come with established branding and extensive resources, while lower-cost options may offer greater flexibility but fewer resources.
Understanding Costs & Fees of Owning a Franchise
1. Quick-Service Restaurants
Quick-service restaurants (QSRs) dominate franchise investments, largely due to their established brands and extensive support systems. However, these advantages come with notable costs. Let’s take a closer look at the key fees associated with QSR franchises.
Initial Franchise Fee
The initial franchise fee for QSRs can vary widely, depending on the brand's reputation and the level of support offered. Typically, these fees range from $6,250 to as high as $90,000, making up about 10–20% of the total investment. For instance, Domino's charges one of the lower fees, starting at $10,000, while Dunkin' demands between $40,000 and $90,000. Other well-known names like McDonald's, KFC, Subway, and Pizza Hut fall somewhere in the range of $15,000 to $45,000.
Ongoing Royalties
Royalties are a key factor in a franchisee's long-term profitability. In the QSR sector, these fees typically range from 4% to 8% of gross sales. McDonald's, for example, charges around 4–5%, while Chick-fil-A takes a more aggressive approach, requiring a 15% royalty fee and a 50% share of profits. Considering that QSR profit margins generally hover between 6% and 9%, these royalties can significantly influence a franchisee's ability to grow and sustain their business.
Marketing/Advertising Fees
Marketing fees are another recurring expense, funding national and regional advertising campaigns to maintain brand visibility. These fees usually fall between 1% and 5% of gross sales. For example, McDonald’s franchisees contribute roughly 4% of their gross sales to national advertising efforts, a rate mirrored by many other QSR brands.
Support and Resources
QSR franchises often justify their higher fees by offering extensive support and resources. Franchisees benefit from proven systems, thorough training programs, and ongoing operational assistance. Standardized processes - such as limited menu options and consistent preparation methods - help streamline operations. These efficiencies contribute to profit margins of 6–9% and average annual gross sales per location ranging from $750,000 to over $2 million.
2. Retail
Retail franchises come with a different fee structure compared to quick-service restaurants (QSRs), encompassing businesses like clothing stores and specialty shops. Let’s break down the key cost components to give a clearer picture of the investment involved in retail franchises.
Initial Franchise Fee
The initial franchise fee for retail franchises typically ranges from $10,000 to $50,000. These fees are generally higher than those for QSRs, reflecting the added costs associated with running a retail operation. Retail stores often demand substantial spending on real estate, staffing, and equipment. As a result, the total initial investment usually falls between $100,000 and $199,000, making retail franchises more capital-intensive than home-based or service-oriented businesses.
For a detailed breakdown of startup costs and ongoing expenses, prospective franchisees can refer to the Franchise Disclosure Document (FDD). This document is essential for understanding the financial commitment required.
Ongoing Royalties
Retail franchises usually charge royalties as a percentage of gross sales, with rates ranging from 4% to 12%, depending on the specific franchise model. These rates often correspond to the level of support provided by the franchisor and the strength of the brand.
Some franchises use a sliding royalty scale, where the percentage decreases as sales increase, creating an incentive for franchisees to grow their businesses. Others may set minimum royalty thresholds to ensure steady income, regardless of seasonal sales fluctuations. In some cases, franchises adopt transaction-based royalty models, where fees are tied to units sold or transactions processed rather than gross sales. This approach can benefit high-volume, low-margin businesses. Additionally, franchisees should budget for marketing contributions alongside royalties.
Marketing/Advertising Fees
Marketing fees for retail franchises are typically 2% to 3.5% of gross sales, which is generally lower than the fees seen in QSRs. This reflects the more localized nature of retail advertising. These funds are used for seasonal campaigns, local promotions, and initiatives aimed at increasing foot traffic.
Retail marketing often focuses on local and regional advertising rather than national campaigns, recognizing the importance of penetrating specific markets. Many franchisors offer cooperative advertising programs, where local marketing efforts are partially funded by the franchisor. Retail marketing strategies also account for seasonal peaks, such as back-to-school and holiday shopping periods, with advertising budgets often adjusted to reflect these cycles.
Support and Resources
The fees paid by retail franchisees are matched by a variety of support systems designed to simplify the complexities of running a retail business. These include tools and resources for inventory management, vendor relationships, and merchandising guidelines. Training programs cover key areas like customer service, sales techniques, and visual merchandising, ensuring franchisees are well-prepared.
Many retail franchises also provide access to advanced technology platforms for point-of-sale (POS) systems, inventory tracking, and customer relationship management (CRM). These tools help franchisees stay competitive with larger retailers while maintaining operational efficiency in a challenging market. By combining hands-on support with cutting-edge technology, retail franchisors enable their franchisees to navigate the demands of the industry effectively.
3. Health & Fitness
The health and fitness franchise industry offers a wide range of opportunities, with costs varying significantly depending on the type of fitness concept and target audience. With the global health and fitness club market expected to hit $202.78 billion by 2030, understanding these cost dynamics is essential for making informed investment decisions.
Initial Franchise Fee
Franchise fees in the health and fitness sector vary more than in many other industries, ranging from under $25,000 to over $250,000. This variation reflects the diversity of options available, from budget-friendly gyms to high-end boutique studios.
For entrepreneurs with limited budgets, franchises like Ageless Fitness charge less than $25,000 to get started. Mid-range options, such as 30 Minute Hit ($25,000 to $50,000) and 9Round Fitness ($50,000 to $100,000), provide accessible entry points. On the premium end, established names like Anytime Fitness and Planet Fitness require initial fees exceeding $250,000.
However, the franchise fee is just one part of the total investment. Additional costs include real estate, construction, equipment, and inventory. For example, Fitness Factory Health Club requires a total investment ranging from $404,500 to $1,060,000, with an initial franchise fee of $49,500. These figures highlight the capital-intensive nature of fitness businesses, especially those with specialized equipment and facilities.
Ongoing Royalties
Most fitness franchises use a percentage-based royalty system tied to gross revenue. For instance, Fitness Together charges franchisees 6% of gross receipts as royalties. These fees fund ongoing support, such as updated training programs and operational guidance.
Higher royalty rates often correspond to more comprehensive support systems. Premium franchises like Planet Fitness justify their royalty fees with strong performance metrics, boasting a franchise failure rate of just 2% and median gross sales of $1,805,835 in 2023. This combination of support and proven success makes such franchises attractive for investors.
Marketing/Advertising Fees
Marketing fees in the fitness sector typically account for 4% of gross receipts, split evenly between national advertising (2%) and local promotions (2%). Fitness Together follows this model.
These marketing contributions are critical in a competitive industry. Studies show that 46% of Google searches have local intent, and 76% of people who search on their smartphones for something nearby visit a business within a day. By pooling resources, franchises can execute large-scale marketing campaigns that individual owners might not afford on their own.
Retention is another key focus, as the average gym retention rate is 71.4%, and the average revenue per gym member in the US is $517 per year. Marketing funds help address the high cost of acquiring new members, which can be five times more than retaining existing ones. Even a 5% increase in retention rates can boost profits by 25% to 95%.
Support and Resources
Fitness franchises offer extensive support systems to help franchisees succeed. These include training programs tailored to fitness operations, covering areas like member retention, facility management, and program delivery.
Technology also plays a big role. Many franchises provide tools for member management, class scheduling, and payment processing, all designed for subscription-based business models. Ongoing education keeps franchisees informed about new fitness trends, ensuring they stay competitive in an ever-changing market.
Support often extends to site selection, helping franchisees analyze demographics, competition, and accessibility - factors critical for fitness locations. Franchisors also guide equipment procurement, making it easier to meet brand standards while managing costs efficiently. These resources set fitness franchises apart from other sectors, offering specialized tools for a membership-driven business model.
4. Hospitality
The hospitality franchise industry offers a broad spectrum of opportunities, from small-scale restaurant concepts to expansive hotel properties. According to McKinsey, franchised hotels have grown in prominence, increasing from 66% of the market in 2012 to 72% in 2023. Like other industries, hospitality features distinct fee structures influenced by the size and reputation of the brand. Let’s break down how hospitality franchises stack up in terms of fees and support compared to other sectors.
Initial Franchise Fee
Initial franchise fees in this sector vary significantly, ranging from $10,000 to $150,500, depending on the brand and market segment. For instance, some Choice Hotels International properties and restaurant-focused concepts like Honest Hospitality have lower fees starting at $10,000. On the other end, flagship properties from well-established brands like Wyndham can command fees as high as $150,500. Mid-tier options, such as Extended Stay America, generally fall around $50,000, with brands like Hilton and Marriott positioned in the middle of this range.
It’s important to note that these fees are just one part of the overall investment. Building costs for new properties can range widely, from $4–10 million for economy hotels to $9–15 million for extended-stay properties, and up to $190 million for luxury hotels.
Ongoing Royalties
Hospitality franchises typically charge ongoing royalties between 5% and 6% of gross room revenue, aligning with the broader industry standard of 4% to 12%. For example, Honest Hospitality charges a royalty rate of 5.5%, which is consistent with other major brands.
Additionally, modern hotel franchises derive 35–45% of their total revenue from non-room sources, such as food and beverage services, event hosting, and co-working spaces. These diversified revenue streams help justify the royalty fees while offering franchisees multiple ways to generate income.
Marketing/Advertising Fees
Marketing fees in the hospitality sector range from 2.5% to 4.5% of gross revenue. For example, Hilton charges 4%, Wyndham 3%, Choice Hotels 2.5–3.5%, and Extended Stay America 4.5%.
These marketing investments deliver tangible benefits. Loyalty program members, for instance, tend to spend more per stay and often book directly with the hotel, increasing profit margins by 15% to 25% by reducing reliance on third-party booking platforms. Research also shows that franchised hotels are seen as more cost-effective (32% vs. 24%) and more widely accessible (27% vs. 22%) compared to independently owned properties.
Support and Resources
Hospitality franchisors provide extensive support systems that go far beyond initial training. Michael Pownall, Co-Founder and Managing Partner at Valor Hospitality Partners, highlights how the franchise model gives owners operational flexibility while leveraging the strength of a global brand.
Franchisees benefit from training programs that cover crucial areas like marketing, human resources, inventory management, and customer service. Given the logistical complexity of hospitality operations, franchisors also assist with navigating diverse geographic and cultural challenges. Many brands integrate advanced technology, such as AI-powered revenue management tools and contactless guest services, to boost efficiency and profitability. Additionally, franchisees gain access to proprietary software and regular industry updates to stay competitive.
Ongoing support is a cornerstone of successful hospitality franchises. Franchisors help franchisees tackle challenges like seasonal sales slumps and provide strategic growth advice. Many also offer minority franchisee incentive programs to lower initial barriers to entry. This comprehensive support system contributes to the industry’s impressive success rate, with 80% of franchises achieving long-term success. These factors explain why more hospitality brands are leaning toward franchising over direct ownership.
5. Professional Services
The professional services franchise sector has seen notable growth, moving away from traditional brick-and-mortar setups toward virtual models, tech-driven solutions, and specialized niches. This category covers areas like accounting, legal services, consulting, and business coaching, giving entrepreneurs an opportunity to channel their expertise within an established franchise framework. Compared to the higher costs often associated with quick-service restaurants or retail franchises, professional services tend to have a more accessible entry point.
Initial Franchise Fee
Starting a professional services franchise usually requires a smaller investment than restaurant or retail franchises. Initial fees typically range from $20,000 to $50,000, though home-based or hybrid franchises may have fees under $20,000. For instance, The UPS Store charges a fee of $29,950, aligning well with the industry average of $25,000 to $50,000. On average, startup costs hover around $150,000, with professional services franchises often sitting on the lower end of that spectrum.
Ongoing Royalties
Professional services franchises tend to have higher royalty fees compared to other franchise types. These fees usually fall between 8% and 12% of gross sales. While royalty fees across all franchises range from 4% to 12%, service-based franchises lean toward the higher end due to the specialized nature of their offerings. These fees also reflect the ongoing support provided by franchisors, including brand development, operational guidance, and quality control measures.
Marketing/Advertising Fees
Marketing fees in this sector vary depending on the franchise model and its target audience. Digital marketing strategies now dominate, enabling franchises to efficiently reach business clients and high-income individuals. Building trust and credibility is a priority here, as clients need confidence when making important financial or legal decisions.
Support and Resources
Franchisors in professional services go beyond basic training to offer extensive support systems. These include assistance with marketing, administration, training, and even location selection. Such robust support helps reduce the risks of starting a business, which is crucial given that nearly one in four new businesses fails within its first year.
Key support features often include ongoing training to ensure franchisees maintain high service standards and stay updated on industry regulations. Administrative and technical support - such as HR and accounting services - allows franchisees to focus on serving clients rather than managing back-office tasks. Additionally, strong brand recognition provides immediate trust among consumers, a key advantage in this field.
In 2023, the global franchise market was valued at approximately $121.36 billion and is expected to reach $279.91 billion by 2032. With small and medium-sized enterprises (SMEs) making up 90% of businesses worldwide, professional services franchises have access to an enormous client base. Economies of scale further boost profitability by enabling franchises to share resources and cut operational costs.
6. Home-Based Businesses
When it comes to franchise opportunities, home-based businesses have carved out a niche for their low startup costs and flexibility. These franchises are particularly appealing as they allow entrepreneurs to work remotely while leveraging a proven business model. With the rise of remote work and a growing focus on work-life balance, home-based franchises have seen a surge in popularity. Their affordability stands in stark contrast to the higher entry costs of industries like hospitality and retail.
Initial Franchise Fee
One of the biggest draws of home-based franchises is their low initial investment. Franchise fees in this sector typically range from $0 to $34,500, with many falling below $20,000. Here are a few examples that highlight the affordability of these opportunities:
Cruise Planners: Offers a franchise fee of $10,995, though a current promotional discount brings it down to $9,995. The total initial investment ranges from $695 to $23,367.
Proforma: Franchise fees vary between $0 and $34,500, depending on the franchisee's experience. Total initial investments fall between $7,030 and $59,695.
United Country Real Estate: Requires a franchise fee of $10,000 to $20,000, with total initial investments ranging from $10,500 to $44,895.
Dream Vacations: Charges a standard franchise fee of $10,500, with various discounts available.
Anago Cleaning Systems: Offers unit franchise opportunities with investments starting as low as $1,000 and going up to $21,000.
Ongoing Royalties
Royalty fees for home-based franchises generally range from 4% to 12% of gross sales. Thanks to lower overhead costs - such as the absence of commercial rent and fewer staffing requirements - franchisees often enjoy higher profit margins, making these royalty payments easier to manage.
Marketing and Advertising Fees
Most home-based franchises emphasize digital marketing and local networking to promote their services. This approach aligns perfectly with the cost-conscious nature of home-based operations, ensuring that franchisees can effectively reach their customer base without overspending.
Support and Resources
Operating remotely comes with its own set of challenges, and franchisors in this space offer robust support to help franchisees succeed. Training programs are typically delivered online, giving franchisees the flexibility to learn at their own pace. Beyond training, ongoing support is often available through online platforms, offering resources like best practices, troubleshooting, and updates.
Another key area of support is territory management. For instance, Caring Senior Service defines territories based on zip codes, ensuring franchisees have access to a sufficient customer base. They also provide custom marketing resources to help franchisees build their local presence.
With low startup costs, flexible operations, and strong franchisor support, home-based franchises offer an accessible and practical entry point for aspiring business owners. This blend of affordability and adaptability makes them a standout option in the broader franchise landscape.
Advantages and Disadvantages
Understanding the trade-offs in different franchise industries can help you make smarter investment choices. Here’s a breakdown of the key benefits and challenges across various sectors:
Industry | Advantages | Disadvantages |
|---|---|---|
Quick-Service Restaurants | Well-known brands, proven systems, and high demand for convenience food. | High franchise fees, tough competition, and strict operational rules. |
Retail | Established customer base, strong marketing support, and bulk inventory savings. | Moderate to high fees, plus risks tied to economic shifts and changing consumer trends. |
Health & Fitness | Growing market, recurring revenue through memberships, and community engagement. | High costs for equipment and facilities, with seasonal membership fluctuations. |
Hospitality | Premium branding, structured training, and solid corporate backing. | Requires significant upfront investment and involves complex operations and regulations. |
Professional Services | Lower overhead, scalable models, and potential for high profits. | Needs specialized skills, strong client management, and often lacks widespread brand recognition. |
Home-Based Businesses | Lower startup costs, flexible operations, and minimal overhead. | Limited growth potential and less franchisor support compared to physical locations. |
Each industry offers a unique mix of benefits and challenges, which can guide your decision-making process when choosing a franchise.
Key Considerations for Franchise Decisions
When evaluating franchises, brand recognition is a major factor. Well-known businesses often charge higher fees, but they also provide stronger reputations and more comprehensive support. On the other hand, home-based franchises typically require lower initial investments and offer flexibility, though they may lack extensive brand backing and growth opportunities.
Professional services franchises often strike a middle ground with low overhead and scalable models. However, they rely heavily on specialized expertise and building client relationships to thrive. Additionally, most franchises charge ongoing royalty fees, usually between 5% and 10% of monthly revenue.
It’s also important to weigh the balance between control and support. Franchises offer proven systems and extensive resources, but they require strict adherence to franchisor guidelines, which can limit your independence. For instance, food and beverage franchises face intense competition and tight profit margins, while healthcare-related franchises may provide more stability but often require specialized knowledge or certifications.
Lastly, higher franchise fees often come with perks like in-depth training, strong branding, and ongoing support. To make the right choice, consider how potential earnings align with upfront costs, and match the opportunity to your financial situation and risk tolerance.
Conclusion
As shown in the comparisons above, franchise fees in 2025 vary widely depending on the industry. Sectors like hospitality and quick-service restaurants (QSR) generally demand higher initial investments, while home-based and professional services present more budget-friendly options. For instance, a McDonald’s franchise can cost up to $2.3 million, whereas starting with a brand like Anago Cleaning Systems might require as little as $400.
These differences in cost are driven by factors such as brand recognition, operational complexity, and the level of support provided by the franchisor. Established names like McDonald’s and Gold’s Gym justify their higher fees with proven business models, comprehensive training, and strong brand presence. On the other hand, smaller or less well-known brands, particularly in home-based or professional services, keep fees lower to appeal to entrepreneurs seeking a more accessible entry point.
That said, upfront fees are only part of the equation. Lower initial costs can sometimes come with higher ongoing expenses. Take Chick-fil-A, for example: while its initial franchise fee is just $10,000, franchisees must carefully account for recurring costs that can add up over time.
The growing demand in the QSR industry further highlights why fees in this sector tend to come at a premium. Pete First, Chief Development Officer at BrightStar Care, emphasizes the benefits of the franchise model:
Franchises generally fail less often than independent start-ups. By following the franchise’s business model and leveraging their support, franchisees often achieve profitability more quickly.
Ultimately, choosing the right franchise requires balancing upfront costs with long-term expenses. High-cost franchises often deliver extensive support and established brand equity, while lower-cost options may offer flexibility and quicker entry into the market. To make an informed decision, consider using resources like Franchise Ki’s free consulting services. Their expertise in franchise matching, due diligence, and funding can help you identify opportunities that align with your financial goals and business aspirations.
FAQs
What factors influence franchise fees and ongoing costs across industries, and how should I evaluate these expenses?
Franchise fees in 2025 generally fall between $20,000 and $50,000 for initial startup costs, with ongoing royalty fees typically ranging from 4% to 8% of gross sales. These figures can vary significantly depending on the industry - larger franchises, such as hotels or well-known brands, often charge higher fees due to the extensive resources and support they provide.
When analyzing these costs, it’s essential to think beyond the upfront franchise fee. Factor in ongoing expenses like royalties, marketing fees, and operational costs, as they can have a big impact on your overall profitability. Take the time to evaluate how these expenses align with the level of training, support, and brand recognition the franchise offers. This will help you determine if it’s a smart match for your financial goals and business plans.
What are the main pros and cons of starting a home-based franchise versus a quick-service restaurant or retail franchise?
Home-based franchises are an appealing option for entrepreneurs seeking an affordable and flexible business model. With lower startup costs, minimal overhead expenses, and the ability to work from home, they provide a cost-effective way to start a business. However, the absence of a physical storefront can pose challenges, such as limited brand visibility and difficulty in attracting walk-in customers.
In contrast, quick-service restaurant (QSR) and retail franchises demand higher upfront investments and ongoing fees. In return, they offer the advantages of well-known brand recognition, consistent customer traffic, and structured growth pathways. That said, these benefits come with trade-offs, including less operational freedom and the need to follow strict franchisor guidelines, which may restrict your ability to make independent decisions.
How do marketing and advertising fees influence a franchise's success, and what are the most common strategies across industries?
Marketing and advertising fees are essential for a franchise's success, as they fuel campaigns that boost brand awareness, draw in customers, and support overall growth. These funds are typically allocated to national or regional marketing initiatives, helping to maintain a unified message and a strong presence in the market.
Franchises often pool these fees to fund large-scale campaigns, with contributions generally based on a percentage of sales or a set fee. While these efforts aim to benefit the brand as a whole, they don't always directly impact individual franchise locations. This makes it critical for franchisors to manage these funds transparently and put them to good use. Well-executed marketing strategies not only keep franchises competitive but also strengthen customer trust in the brand.
