The Real Cost of Buying a Franchise Branch
A fast-food franchise for sale means there are business opportunities for those who believe they would make a good fit as a franchise owner of a new branch. Professionals who would like to work with an established and popular brand can do so by buying a new branch. But what is the total fast-food franchise cost, and how much money does an individual have to have upfront and ongoing to cover expenses?
This article will explore those costs in detail, including information on what a franchise fee is, what other expenses a new franchisor must pay, and the total Mary Browns franchise cost to buy into the brand.
What is a Franchise Fee?
A franchise fee is the cost a potential franchisee must pay the franchisor for the rights to use their brand and franchise system. This is generally a one-time expense the new franchisee will pay outright in order to secure a new franchise branch to manage and operate. This expense is meant to cover the franchiser’s work in establishing a new branch location for the franchisee, including getting property systems up and running, for training materials, and for using branded trademarks.
However, there are also other costs associated with franchise fees in Canada, including other upfront expenses and ongoing payments.
Can you Negotiate Franchise Fees?
New franchisees typically have to pay this fee to enter into a franchise agreement. There are almost no negotiations at the time of signing the franchise agreement, and the new franchisee will be on the hook for all expenses associated with the new branch.
That being said, successful franchises will usually have dedicated banking and business advisors to assist new franchise owners with financial planning when buying a franchise branch. For example, here at Mary Browns, we have established financing programs with various banks to help new and existing franchise branch owners establish and run their operations.
Breaking Down the Mary Browns Franchise Cost
Let’s explore the franchise costs in Canada associated with buying into a fast food franchise by using the tried and true system that Mary Browns provides. The resources required for Mary Brown’s franchising, and any other franchising brand, can be broken down into two main categories of expenses- upfront costs, and ongoing costs.
Upfront Franchise Costs
The upfront franchise costs refer to the money an individual must pay to the franchise before becoming a franchisee. A potential franchisee must have liquid capital on top of the franchise fee they must pay outright when securing a fast food franchise for sale.
Liquid capital refers to the personal funds an individual must have to be able to secure financial support from the franchise itself. Depending on the brand, the liquid capital amount can range anywhere between 100 thousand and 500 thousand dollars to secure a single franchise location.
When it comes to Mary Browns, the amount a potential franchisee must possess in liquid capital is 300 thousand dollars. On top of liquid capital, they also require individuals have an extra $50,000 in working capital at their disposal.
On top of liquid capital, a potential franchisee must also have the necessary funds to cover the franchise fee before the ownership process can take place. For Mary Browns, the franchise fee will cost you $30,000. This thirty-thousand dollar cost is a pretty standardized franchise fee in Canada, as many other franchise brands require the same or similar amount.
Ongoing Franchise Costs
The ongoing franchise costs refer to expenses that the new franchisee owner will be responsible for covering on a monthly basis once they take ownership of the new branch. These ongoing costs cover royalties and marketing expenses.
Royalties are an essential ongoing expense that you must pay to the franchiser every month. Royalty fees are payments made to the owner of the entire franchise in order to operate under the established brand and franchising system. Essentially, you are paying another person to use someone else’s property, in this case, the franchiser’s property. Such fees generally cover the cost of copyrights, patents, and trademarks.
This ongoing cost is portrayed in the form of a percentage of the overall gross sales of a branch. For Mary Brown’s franchising, the franchisee will pay 5% in royalties each month.
A franchise’s marketing campaign is typically the same across all locations, branches, and businesses. Since a franchise operates under one established and recognized brand, all marketing assets and campaigns must have a cohesive and consistent look across the board. For that reason, each franchise location must pay for advertising costs monthly.
This ongoing cost is also portrayed in the form of a percentage, based on gross sales of each location. Mary Brown’s ongoing marketing costs sit at 4% of the franchisee’s gross sales. The monthly fee will cover the cost of the franchise’s national marketing campaign. On top of this 4%, individual franchise branches are also encouraged to spend a further 1% of their monthly gross sales on local advertising.
Total Average Start-Up Franchise Costs Canada
Taking into account the upfront costs associated with the franchise fee and liquid capital, on top of the ongoing monthly expenses of royalties and marketing costs, a new franchisee will need to shell out approximately $800,000 or more when establishing a new Mary Brows franchise location.
This eight-hundred thousand dollar amount is in line with other franchise brands in Canada, as the overall average start-up cost for Canadian franchises falls between $500,000 and over $1 million.
New franchise locations are usually a turn-key operation, meaning all set-up work, such as construction, design, permits, equipment, signage and more, are completed by the franchise before the new franchisee takes over. This means that the franchisee will take over a fully-functioning establishment from the start of operations.
The Best Fast Food Franchise for Sale
With the above costs in mind, if you’re looking to take over a new branch of a fast food franchise for sale, then consider partnering with Mary browns. With over 200 locations in Canada, Mary Browns is always looking for the next opportunity to expand across the country. With comprehensive training and ongoing business and financial support, Mary Browns is a franchise that will work with you to ensure you succeed.
Contact our franchise experts to learn more today.