Curious about what a franchise restaurant costs? Learn about the typical costs and fees of a franchise investment and how the franchisor uses them.

Initial Investment: The Big Picture When you see fees listed on a franchise site, consider them a starting point. There’s variance in franchise restaurant costs due to location, size, and other factors. The initial investment includes several key components: • Initial Franchise fee: This one-time fee grants you the license to operate under the franchise’s brand. It varies widely but you can expect to pay anywhere from $10,000 to $50,000 for most franchises. For example, Zaxbys chicken restaurant franchise has a $35,000 initial franchise fee. • Build-out costs: These expenses are for building and outfitting your restaurant. Depending on whether you’re building from scratch or remodeling, costs start in the thousands and can reach over a million dollars. • Equipment: From kitchen appliances to POS systems, the necessary equipment can significantly add to your startup costs. • Inventory: The initial food, beverages, and supplies stock will also contribute to your upfront expenses. • Working capital: You’ll need funds to cover operating expenses before your restaurant becomes profitable. This could include payroll, utilities, and marketing.

Ongoing Fees: The Cost of Continuous Support Beyond the initial investment, there are ongoing fees to consider with franchise restaurant costs: • Royalties: A percentage of your gross sales, typically 4% to 8%, paid to the franchisor for ongoing support and the right to continue using the brand. • Advertising fees: These fees contribute to national and regional marketing efforts and can be a fixed amount or a percentage of sales. • Renewal fees: If you wish to continue operating after your initial franchise agreement term, you may need to pay a renewal fee.

How Franchisors Use These Fees Franchisors use these fees for various purposes, including research and development, training and support, marketing, and corporate costs. To stay competitive, restaurant franchisors invest in developing new menu items and improving systems. Fees contribute to the training and ongoing support provided to franchisees. At the same time, the advertising fees fund national advertising campaigns. Lastly, some of your fees go to the franchisor’s corporate overhead, such as salaries.

Is Franchising Worth the Investment? With the latest industry analysis from CSIMarket.com, in Q3 of 2023, the restaurant industry is producing an above-industry average for return on assets (ROA) at nearly 12%. However, conducting thorough research and understanding all the costs is crucial. It’s important to remember your return on investments and ROA can depend on several factors, including location, demand, market, and sales. Investing in a restaurant franchise like Zaxbys provides brand recognition, support, and a proven business model, allowing you to grow faster. In our latest FDD (franchise disclosure document), Zaxbys franchise owners experienced annual Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) ranging from $52,870 to $598,981, with about 63% of franchisees making $230,008 or more.*