What it costs to become a fast food franchisee

Nancy Marshall-Genzer Feb 28, 2014
HTML EMBED:
COPY

What it costs to become a fast food franchisee

Nancy Marshall-Genzer Feb 28, 2014
HTML EMBED:
COPY

Quiznos is reportedly close to filing for bankruptcy. One problem for the sandwich chain is unhappy franchise owners.

What’s it take to open a successful fast food store?

If you want your own slice of McHeaven, a McDonald’s franchise will cost you: “Total investment [will cost] between $1.1 to $2.1 million depending on the layout and size of that McDonalds,” says Don Sniegowski, editor of Blue MauMau, a news site for franchise owners. 

Sniegowski says those millions of dollars include the cost of building your McDonald’s, plus you have to pay about 16 percent of your sales to the company for royalties and advertising.

Does that sound a little steep? Try Subway.

Keith Miller, who owns three Subway stores in the Sacramento, Calif., area and still works the early shift, says to start a Subway, you’d need at least $200,000. And royalties and ad fees only eat up about 12 percent of your sales.  Miller says make sure you’re not required to buy too much equipment from your parent company, the franchisor.

Otherwise, he says, “All of a sudden a $5,000 refrigerator becomes $6,000 because the franchisor is collecting $1,000 off of that.”

The estimated minimum cost to start a franchise, according to Entrepreneur.

Miller says franchising has gotten a lot more expensive since he opened his first Subway in 1989.  That’s partly because fast food chains are facing more competition from fast casual chains like Applebee’s.

“So I think some of these bigger quick-service companies are really fortifying their franchisee base to make sure they can compete with these upstart fast casual brands,” says Sam Oches, the editor of a trade publication called QSR Magazine.

Oches says the fast food folks want the strongest, richest franchisees they can get.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.