Most Expensive Franchise Fees

For many an entrepreneur, the hardest part is finding that one killer idea to monetize. Fortunately, you don’t have to. Just buy a franchise, since it’s an already proven business model that someone else took the time to develop and perfect. You don’t have to create a product line, set pricing or devise any of the other standards required to maintain uniformity from one location to the next. All you need to have are some deep pockets.

Got a Room?
For the exceptionally cash-flush among you, innkeeping is a way to see revenue immediately. Hotels are a franchise segment unto themselves, requiring far greater start-up costs than your typical franchised restaurant or dry cleaner. Even Choice Hotels’ non-luxury brands, such as Comfort Inn, Quality Inn, EconoLodge and Rodeway Inn, require plenty of net worth and liquidity among its potential franchisees.

Merely applying for one of the above franchises costs a non-refundable $2500 (which certainly keeps the window-shoppers out). Your total investment can range as high at $14.6 million. Unlike most franchise operations, your customers won’t be exiting the premises quickly. To keep them there overnight and beyond, you have to be far more diligent than your standard convenience store operator is with his or her clientele. The tradeoff is that you need far fewer customers to turn a profit when you’re running a hotel.

Food for the Soul
If your self-employment dreams involve an ersatz Stanley Cup overflowing with chocolate, then a Golden Corral franchise is your best bet. However, the nationwide buffet chain doesn’t offer franchises to just anyone. To qualify, you need $2.5 million in net worth (half a million of that being liquid). It will cost you anywhere from $1,971,500 to $6,756,500 to open the doors of your Golden Corral franchise, and that’s all for an average guest check of $9.50.

Golden Corral’s more ubiquitous competitor is Denny’s, which operates 1595 restaurants in the United States and Guam. While Denny’s requires a relatively modest $40,000 fee, the company expects any potential franchisee to carry at least $350,000 in liquid capital and a $1 million net worth. If you’re lucky and/or ambitious enough to meet all of Denny’s criteria, you can expect to make an initial investment of between $1,178,515 and $2,396,165. The fact that Denny’s has rounded these numbers to the nearest five-dollar increment shows that the company presumably knows what it’s doing when forming its estimates.

Can’t decide whether to buy a restaurant, a gas station and a tchotchke retailer? Buy a convenience store franchise and you can own all of the above under a single roof. Circle K requires its prospective franchisees to each have $100,000 in liquid assets and a net worth of half a million dollars, keeping competitive with industry leaders Arco/ampm and 7-Eleven.

Stay Local
A franchise doesn’t have to be nationwide, or even close, to command a high price among potential buyers. Amazing Spaces is a grandiosely named series of storage units in Houston and its environs, but with justification: its units look positively luxurious. Amazing Spaces has developed a market segment well beyond standard storage, and management feels it can justify large startup costs to its franchisees.

The Amazing Spaces franchise fee, $75,000, is somewhat modest. The liquidity and capital requirements, however, are not. Opening a franchise costs anywhere between $1.9 million and $8.25 million. Amazing Spaces doesn’t believe in saturating the market too quickly, either. Ten years after its founding, the company began franchising. Four years after that, the company has four locations, or 1,591 fewer locations than Denny’s. Amazing Spaces also requires a 6% franchise royalty fee. For every 15 storage units you operate, the company headquarters essentially keeps one for itself.

The Bottom Line
It bears repeating that owning a franchise isn’t merely a method of making money by cashing in on an established business model and allying oneself with a formidable brand name. Owning a familiar chain restaurant, or hotel, or even strip-mall mini-gym, requires plenty of work if you want to be successful. Some franchisees sign extremely unfavorable (to them) contracts with the issuing company: only then do the franchisees run the numbers and realize they’d be better off either going it alone or working for someone else.

For some, the idea of a substantial franchise fee defeats the very purpose of entrepreneurship. After all, if you’ve already made enough money to afford a Choice Hotel, chances are good that you’re rich enough that you don’t need to work anyway. However, for others, the opportunity to buy into an established and successful model is the very definition of a safe and lucrative investment. If you’re in the latter category, then you already know that the old adage “it takes money to make money” usually applies.

by Greg McFarlane 

Greg McFarlane is the co-founder of and head writer at Control Your Cash, where he deconstructs important personal finance topics and shares never-fail strategies for building wealth every Monday, Wednesday and Friday. Greg is also the author of the site’s companion volume, Control Your Cash: Making Money Make Sense, the definitive personal finance manual for people who know that they know nothing about money. Greg lives in Las Vegas and in Lahaina, Hawaii.