A McDonald’s franchise requires you to have at least $955,000 in unencumbered finances, while Subway requires its franchisees to invest a minimum of $116,000 before joining their network.
If you plan to start a sandwich business for the first time, it is advisable to join a smaller company. Even if you have the money to spend on a famous brand, there are strict rules for applicants and some of these requirements include a solid track record in running a business. This also applies when you become a franchisee for a lesser-known brand, but the difference lies in not investing too much without certainty on business performance.
Cost of Initial Investment
McDonald’s screens its members through the expensive amount for a person’s financial resources. Franchisees need to pay a $45,000 franchising fee and around 4% of gross sales as their service fee. Subway franchisees must pay 8% of their total sales and a $15,000 franchise fee, aside from royalty payments.
On the other hand, a Burger King franchise requires you to pay 4.5% from overall sales as royalty fees. Initial franchise fees could range between $15,000 and $50,000, while you need to have a net worth of $1.5 million and at least $500,000 in liquid cash.
McDonald’s also requires the same liquid cash requirement, while Subway imposes a smaller one ranging between $30,000 and $90,000. You need this money to cover for emergency expenses and overhead costs, until your business generates enough profit for you to record actual income.
If you are interested in Wendy’s, it may not be possible to buy one in the U.S. at the moment. The company has not been accepting new members for its mainland operations, although it may be possible to buy a franchise in Canada.
About Royalty Fees
Royalty payments serve as another reason owning a well-known franchise can be expensive. Franchisees pay this either every month or quarter depending on their contract. It’s one way for franchisors to make money from lending their brand, business strategy, and resources to their members.
If information on how your chosen franchisor calculates royalty payments isn’t immediately available, just remember that you would get between 91% and 95% of sales every month or quarter. Your franchisor will receive the remainder. Most franchisors charge a fixed percentage of sales, although some charge varying rates that are either higher or lower based on the sales numbers.
Finally, aspiring franchise owners should think about hiring a lawyer to go over the specifics of an agreement. This will cost extra, but legal advice helps you understand what you’re getting into and possibly avoid a deal done in bad faith.
Money is not the only thing that you will need to join a national fast-food chain. Some of these brands require applicants to have years of experience in owning a business to become eligible members. First-time franchisees should focus on smaller ventures and when choosing among different opportunities, consider a turnkey food franchise for better value on your investment.