The cost of buying a franchise

Franchises provide a ready-made business model and support, but there are upfront costs, which can vary greatly 

01 McDONALD’S

As one of the world’s biggest fast-food chains, McDonald’s can afford to be extremely selective when choosing franchisees. The company expects all potential franchisees to undertake at least nine months of unpaid full-time training, as well as provide a refundable £5,000 security deposit and non-refundable training costs of £750. But the major startup costs come in the form of a one-off franchise fee of £30,000, and between £200,000 and £500,000 to buy a restaurant. Only 25 per cent of the investment needs to be in unencumbered funds with loans being able to make up the remaining amount.

02 CeX

Second-hand technology retailer CeX offers franchisees the choice between a standard store with a typical startup cost of £230,000 or a smaller outlet with a lower investment of £140,000. Of the total startup cost, franchisees are expected to make a minimum personal investment of £70,000 for the normal store and £40,000 for a smaller shop. The majority of this balance will go towards stock and fitting out the store. Franchisees investing in CeX will be required to go through an extensive 12-week store-based training programme with this opportunity suited to those happy to get involved at all levels of the store from management to serving customers.

03 KUMON

Kumon study centres provide after-school study programmes in maths and English. The full-time business opportunity requires at least £3,000 of investment upfront, including £400 for the initial licence fee and £2,600 for marketing during the first year of trading. This figure does not include rent and any other running costs, but these are usually low as the study centres can be operated from church halls or leisure centres, hired only for the two to six hours a week of class time. Due to the educational nature of Kumon, all franchisees must have a university degree and pass a proficiency test in maths and English.

04 THE LITTLE GYM

The Little Gym is a children’s gym offering classes for kids aged from 4 months to 12 years. The typical initial set up investment ranges from £222,000 to £309,000 with the franchisee needing to have at least 30 per cent capital upfront, allowing the remaining 70 per cent to be financed by a bank loan. The franchisee entrance fee stands at £38,500, which is included in the initial investment, but the lease deposit and short-term operating working capital is excluded, adding at least an additional £40,000 to costs. Parents and those who have an affinity to working with children are well suited to become The Little Gym franchisees.

05 MOLLY MAID

Molly Maid provides house cleaning services across the UK and is a lower-cost franchise option than fast-food chains, gyms and other high-cost franchises. A £7,975 franchise startup package, £9,000 marketing launch programme and a minimum of £8,000 in working capital are the three main upfront costs for new Molly Maid franchisees. This home-base franchise works well for individuals who want flexible working hours and a good work-life balance, as well as providing a viable franchising opportunity for those who lack formal qualifications or business experience.

06 SUBWAY

Fast-food sandwich chain Subway already has 40,000 stores in more than 100 countries, with around 2,000 of these in the UK, but there are still plenty of opportunities for new franchisees. Depending on the size of the Subway store, estimated startup costs vary dramatically. The lower-cost option is around £85,000, going all the way up to more than £220,000 for the more expensive stores. No matter what choice the franchise makes, a £8,500 franchise fee is payable. Franchisees will normally work at all levels, including everyday running of the store to accounting tasks.

07 DRAIN DOCTOR

Domestic and commercial plumbing and drainage service company Drain Doctor requires an upfront franchise fee of £35,495 plus VAT, which covers local marketing, operational support and branded materials, alongside other ongoing services. Franchisees are expected to commit to an initial ten-year licence that can be renewed at no additional cost. As the franchisee can either run the operation as a full-time job or just manage the business, this opportunity would equally suit an experienced tradesperson, who wants to be hands-on, or an outside investor.