Why become a restaurant franchisee? There are obvious perks: parent companies take care of the marketing, advertising and brand development for your restaurant, but that comes with a price.
Many franchise owners pay initial "franchise fees" to the company, as well as advertising fees and weekly or monthly royalty fees; altogether, often these can add up to a multimillion-dollar investment.
On top of that, the restaurant chains often make sure you have at least a few hundred-thousand dollars to your name before you even fill out a franchisee application. Most national and international fast food chains require that franchisees have several hundred-thousand dollars—if not millions—in net worth and liquid assets.
Restaurant chains—both publicly traded and privately held—often list franchise information on their company websites. Here are the costs of opening franchise locations for the top 10 fast food chains in the U.S., ranked by annual retail sales, as analyzed by Technomic, a food market research firm, and what each franchise locations earns annually, on average.
—By Rebecca Ungarino and Katie Little
Posted 20 April 2015
Looking to open a home to Big Macs and Bacon McDoubles? You'll need $500,000 in non-borrowed personal resources to be considered for a franchise at the Golden Arches.
A McDonald's franchise lease is 20 years, and the buyer is required to pay 25 percent cash as the down payment for the purchase of a restaurant. Opening new McDonald's locations, which the company says is relatively rare for a first-time owner, requires a $45,000 initial fee and 40 percent cash as the down payment.
Opening one of the sandwich giant's franchises costs an estimated $116,000 to $263,000, in addition to a franchise fee of $15,000. Subway franchisees are required to pay 8 percent in franchise royalties and 4.5 percent in advertising for their locations.
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The home of the foot-long has three approved lenders who offer financing for new owners. Subway has more locations than any other restaurants in the world.
At Burger King, the vast majority of its locations are owned and operated by franchisees.
A franchisee must have a net worth of $1.5 million, and $500,000 in liquid assets to open a Burger King location. They also must pay a franchise fee of $50,000 before the restaurant opens, and a monthly royalty fee of 4.5 percent of gross sales.
On average, development costs can range from $1.2 million to $2.2 million
At Wendy's, a franchisee must have a minimum net worth of $5 million to open a Wendy's in the U.S. and minimum liquid assets of at least $2 million.
Wendy's also requires a $5,000 application fee and a $40,000 technical assistance fee per restaurant, with the estimated total investment required to start a new Wendy's location in the range of $2 million to $3.5 million.
Taco Bell has a $45,000 initial franchise fee, and royalties are 5.5 percent.
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The company known for its Baja Blast soft drink and Gorditas, offers five layouts for its locations, varying by size and area's demographic. The buildings designated as "small" are established within a two-mile radius of populations of 15,000 or less.
It's the coffee and pastry giant on which America runs. Dunkin' Donuts restaurants are nearly 100 percent franchisee-owned.
Estimated initial investment for a new location will run you $134,600 to $1,611,100—a number that does not include real estate.
Dunkin' Donuts recommends franchisees possess a minimum net worth of $500,000 and liquid assets of at least $250,000 per restaurant.
Opening a Chick-fil-A franchise requires a $10,000 initial commitment from franchise candidate.
Candidates must have $5,000 in liquid assets and pay a $5,000 franchise fee, according to the website Franchise Help. Factoring in additional expenses, it could cost between $280,725 and $814,650 to open a restaurant, the site said.
Chick-fil-A receives about 20,000 in annual franchisee inquiries and out of those applicants, the company selects an average of 75 to 80. Last month, the fried chicken chain said it will debut its first stand-alone location in New York City.
Average annual sales per unit, 2013: $2.8 million
The cost of opening one Pizza Hut franchise is estimated between $295,000 and $422,000. This includes an initial $25,000 franchise fee paid in a lump sum and as much as $20,000 in advertising fees. A candidate must have $700,000 net worth and $350,000 in liquid assets.
Pizza Hut is currently expanding in New York, Rhode Island, Washington, D.C., Massachusetts and New Hampshire.
Panera Bread's franchisee requirements include a "passion for fresh bread," but its other requirements are a bit more expensive. Depending on the type of space and its location, opening one franchise costs between $1,063,165 and $3,240,538, excluding real estate and related costs, and landlord allowances. Also included in this price range is a $35,000 franchise fee.
An independent franchisee must have a net worth of $7.5 million and liquid assets of $3 million.
Panera Bread typically develops 15 "bakery-cafes" in a period of six years.
Average annual sales per unit, 2013: $2.5 million
Each franchisee is also required to invest a minimum of $80,000 in personal cash into the Domino's location, with the balance financed through a lender chosen by the franchisee.