{"id":43199,"date":"2023-03-08T13:57:49","date_gmt":"2023-03-08T18:57:49","guid":{"rendered":"https:\/\/www.thefranchiseking.com\/?p=43199"},"modified":"2026-04-27T10:39:22","modified_gmt":"2026-04-27T14:39:22","slug":"franchise-startup-costs","status":"publish","type":"post","link":"https:\/\/www.thefranchiseking.com\/franchise-startup-costs","title":{"rendered":"Are Franchise Startup Costs Getting Too High?"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"620\" height=\"414\" src=\"https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high-620x414.jpg\" alt=\"franchise startup costs are too high\" class=\"wp-image-43217\" srcset=\"https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high-620x414.jpg 620w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high-320x213.jpg 320w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high-768x512.jpg 768w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high-600x400.jpg 600w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high.jpg 1000w\" sizes=\"auto, (max-width: 620px) 100vw, 620px\" \/><\/figure>\n\n\n\n<p>Yes. <strong>Franchise startup costs<\/strong> are starting to get too high. But why?<\/p>\n\n\n\n<p>Is inflation to blame?<\/p>\n\n\n\n<p>Are franchise ownership <a href=\"https:\/\/www.thefranchiseking.com\/small-business-ideas\">startup costs<\/a> becoming higher because there&#8217;s so much interest in franchising? Or is it something else?<\/p>\n\n\n\n<p><strong>Spoiler alert!<\/strong> It&#8217;s something else.<\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>The Reason Franchise Startup Costs Are Getting Higher<\/h2>\n\n\n\n<p>Franchisors <em>are<\/em> paying more for everything. <\/p>\n\n\n\n<p>Things like <a href=\"https:\/\/wpx.net\/?affid=5268\" target=\"_blank\" rel=\"noreferrer noopener sponsored nofollow\">website hosting<\/a>, online marketing, keeping the lights on at headquarters, and a myriad of other business-related items <em>do<\/em> cost more these days. And some of these costs are <a href=\"https:\/\/www.thefranchiseking.com\/franchise-royalties\">passed down to franchisees<\/a> in one way or another. <\/p>\n\n\n\n<p>But the truth is, there&#8217;s one cost&#8230;one <a href=\"https:\/\/www.thefranchiseking.com\/great-clips-franchise\">out of all the costs associated with operating a franchise business<\/a>, that continues to get higher. And it has absolutely nothing to do with inflation. <\/p>\n\n\n\n<p>It&#8217;s <a href=\"https:\/\/www.thefranchiseking.com\/the-franchise-fee-dont-focus-on-it\">the franchise fee<\/a>. <\/p>\n\n\n\n<p>The &#8220;<em>fee<\/em>&#8221; that gets the ball rolling once a franchisee signs her franchise contract. <\/p>\n\n\n\n<p><a href=\"https:\/\/www.thefranchiseking.com\/a-franchise-contract\">Here are<\/a> a few things you need to know about the contract.    <\/p>\n\n\n\n<p>But why are new franchisees forking out more of their hard-earned money for the initial franchise fee?<\/p>\n\n\n\n<p>Because of&#8230;<\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>FSO&#8217;s<\/h2>\n\n\n\n<p>I frequently bring up <a href=\"https:\/\/www.thefranchiseking.com\/s-corp-small-business\">franchise business topics<\/a> that others in my industry don&#8217;t. Or won&#8217;t. Why?<\/p>\n\n\n\n<p>Because there are several under-the-radar things that the majority of today&#8217;s <a href=\"https:\/\/www.thefranchiseking.com\/franchise-due-diligence-trap\">aspiring franchise owners need to know<\/a>. Why?<\/p>\n\n\n\n<p>Because they&#8217;re putting a good chunk of their money at risk to go after their dreams and goals. <\/p>\n\n\n\n<p>In view of that, one of things they (<em>you<\/em>) need to know is (<em>in some cases<\/em>), franchise fees are outrageously high. This is especially true with younger franchise concepts.    <\/p>\n\n\n\n<p>I&#8217;m referring to newer franchisors who have decided to outsource their franchise sales to outside sales companies.  <\/p>\n\n\n\n<p>Known as Franchise Sales Organizations (<em>FSO&#8217;s<\/em>), these companies sell franchises. And the salespeople who work for them are 100% commission based. <\/p>\n\n\n\n<p>And not only does that put pressure on them to sell, it does something else. <\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>Who Pays The Franchise Sales Commissions?<\/h2>\n\n\n\n<p>Should I tell you how much FSO&#8217;s get paid for a successful new franchise sale?<\/p>\n\n\n\n<p>Yes! <\/p>\n\n\n\n<p>But I&#8217;m going to share those <a href=\"https:\/\/www.thefranchiseking.com\/checking-account-franchise-accountant\">figures <\/a>in a somewhat stealthy way.<\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<div class=\"tenor-gif-embed\" data-postid=\"8585998\" data-share-method=\"host\" data-aspect-ratio=\"0.555\" data-width=\"70%\"><a href=\"https:\/\/tenor.com\/view\/hiding-cantseeme-invisible-camouflage-camo-gif-8585998\">Hiding Cantseeme GIF<\/a>from <a href=\"https:\/\/tenor.com\/search\/hiding-gifs\">Hiding GIFs<\/a><\/div> <script type=\"text\/javascript\" async=\"\" src=\"https:\/\/tenor.com\/embed.js\"><\/script>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>Junk Pirates!<\/h2>\n\n\n\n<p>Fred and Doug felt they had something special. <\/p>\n\n\n\n<p>They knew that to compete with the big names in junk removal, they would need to bring something to the table that was special. Different. So they did. <\/p>\n\n\n\n<p>$150,000 later, they had a franchise opportunity to offer. And they made it official in February of 2021. Junk Pirates!* <\/p>\n\n\n\n<p>*Not a real franchise business.  <\/p>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"620\" height=\"594\" src=\"https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/junk-franchise-620x594.png\" alt=\"junk pirates franchises\" class=\"wp-image-43224\" style=\"width:443px;height:424px\" srcset=\"https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/junk-franchise-620x594.png 620w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/junk-franchise-313x300.png 313w, https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/junk-franchise.png 640w\" sizes=\"auto, (max-width: 620px) 100vw, 620px\" \/><\/figure>\n\n\n\n<p>By July, they had sold their 1st franchise to an already successful businessman in Pittsburgh. He opened Junk Pirates of Pittsburgh in November, and quickly started producing revenue. <\/p>\n\n\n\n<p>In their 2nd year of franchising, Junk Pirates sold two new franchises. That brought their total number of franchises to 3. A number that wasn&#8217;t in their plans. And they were starting to get worried. <\/p>\n\n\n\n<p>Here&#8217;s what happened next. <\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>Spectrum Franchise Sales<\/h2>\n\n\n\n<p>Early on, it was recommended that Fred and Doug join the IFA. They did. And that&#8217;s where they learned about FSO&#8217;s. <\/p>\n\n\n\n<p>So in January of 2022, they contacted Scott Delaney, the head of Spectrum Franchise Sales.* They met him at the IFA convention, and he seemed to know what he was talking about. They hired him. <\/p>\n\n\n\n<p>*I made that name up. <\/p>\n\n\n\n<p>Scott quickly told Fred and Doug to <strong>raise their franchise fee<\/strong>, from $30,000 to $45,000. <\/p>\n\n\n\n<p>Fred and Doug weren&#8217;t in a good place. <\/p>\n\n\n\n<p><strong>Translation:<\/strong> they weren&#8217;t feeling too confident about their franchise concept. And with only 3 franchises sold, why should they? <\/p>\n\n\n\n<p>In any event, they decided to listen to Scott&#8217;s (<em>not very subtle<\/em>) suggestion, and had their franchise lawyer increase the franchise fee in time for the new* FDD to be published.    <\/p>\n\n\n\n<p>*<em>Federal law requires franchisors to update their franchise disclosure documents (\u201cFDD\u201d) within 120 days after their fiscal year end (\u201cFYE\u201d). State registrations must also be renewed annually<\/em>. &#8211; <a href=\"https:\/\/www.jdsupra.com\/legalnews\/ten-tips-for-franchisors-this-fdd-7726346\/\" target=\"_blank\" rel=\"noreferrer noopener\">From the JD Supra Law site<\/a>.<\/p>\n\n\n\n<p>Wait. You <strong>do<\/strong> know why the franchise fee was raised, correct?<\/p>\n\n\n\n<p>To pay the outside salesperson <strong>$15,000<\/strong> for each successful sale of a new franchise.<\/p>\n\n\n\n<p><em>No other reason<\/em>.  <\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>3 Things Can Happen<\/h2>\n\n\n\n<p>When FSO&#8217;s get involved with <a href=\"https:\/\/www.thefranchiseking.com\/new-franchise-opportunities-risk\">young franchisors<\/a>, 3 things can happen.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Lots of new franchises get sold, and the franchisor hires enough employees and adds the infrastructure needed to support all the new franchisees. <\/li>\n\n\n\n<li>Lots of new franchises are sold, but the franchisor does a horrible job of supporting them because not enough employees were hired, and their internal systems weren&#8217;t ramped up enough to handle all of the new franchisees. <\/li>\n\n\n\n<li>Barely any new franchises were sold, because the system was too new, and prospective buyers didn&#8217;t feel the <strong>$45,000<\/strong> franchise fee was worth what they <em>may<\/em> get in return.        <\/li>\n<\/ol>\n\n\n\n<p>One more thing. <\/p>\n\n\n\n<p>I&#8217;ve heard this from my clients&#8230;for the past couple of years. <\/p>\n\n\n\n<p>These outside salespeople are extremely aggressive. <\/p>\n\n\n\n<p>I can&#8217;t imagine why.<\/p>\n\n\n<p>&nbsp;<\/p>\n\n\n<h2>Should Franchise Fees Be Raised To Increase New Franchise Sales?<\/h2>\n\n\n\n<p>If you&#8217;re a new franchisor, struggling to sell franchises, is hiring an outside franchise sales company the way to go? Maybe.<\/p>\n\n\n\n<p>But your franchise concept had better be special. <\/p>\n\n\n\n<p>And you better have the money to hire more employees to support lots of new franchisees and add what&#8217;s needed to <a href=\"https:\/\/www.thefranchiseking.com\/top-franchise-systems\">your infrastructure<\/a>.<\/p>\n\n\n\n<p>Because if you don&#8217;t, your growth can actually happen so fast, your company crashes and burns. You can get sued by franchisees who never opened. One more thing. This is a tip for people looking to buy a franchise. <\/p>\n\n\n\n<p>If you&#8217;re <a href=\"https:\/\/www.thefranchiseking.com\/top-franchise-opportunities\">looking<\/a> at <strong>newer<\/strong> franchises, and the franchise fee is approaching $50,000 or more, ask the franchisor why it&#8217;s so darn high.<\/p>\n\n\n\n<p>Then ask the existing franchisees if it&#8217;s worth the cost of entry.   <\/p>\n\n\n\n<p>Before you sign anything. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yes. Franchise startup costs are starting to get too high. But why? Is inflation to blame? Are franchise ownership startup costs becoming higher because there&rsquo;s so much interest in franchising? Or is it something else? Spoiler alert! It&rsquo;s something else. &nbsp; The Reason Franchise Startup Costs Are Getting Higher Franchisors are paying more for everything. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":43217,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[2123,56],"tags":[2169],"class_list":["post-43199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-franchise-business","category-op-ed","tag-initial-franchise-costs"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Franchise Startup Costs: Are They Getting Too High?<\/title>\n<meta name=\"description\" content=\"Discover the shocking truth about franchise startup costs! Is it becoming too expensive to buy a franchise these days? Find out now.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.thefranchiseking.com\/franchise-startup-costs\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Are Franchise Startup Costs Getting Too High?\" \/>\n<meta property=\"og:description\" content=\"Discover the shocking truth about franchise startup costs! Is it becoming too expensive to buy a franchise these days? Find out now.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.thefranchiseking.com\/franchise-startup-costs\" \/>\n<meta property=\"og:site_name\" content=\"The Franchise King\u00ae\" \/>\n<meta property=\"article:published_time\" content=\"2023-03-08T18:57:49+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-27T14:39:22+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.thefranchiseking.com\/wp-content\/uploads\/franchise-costs-high.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"667\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Joel Libava\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs\"},\"author\":{\"name\":\"Joel Libava\",\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/#\\\/schema\\\/person\\\/b560fd324f6df9be52ac875e631beb66\"},\"headline\":\"Are Franchise Startup Costs Getting Too High?\",\"datePublished\":\"2023-03-08T18:57:49+00:00\",\"dateModified\":\"2026-04-27T14:39:22+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs\"},\"wordCount\":979,\"publisher\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.thefranchiseking.com\\\/wp-content\\\/uploads\\\/franchise-costs-high.jpg\",\"keywords\":[\"initial franchise costs\"],\"articleSection\":[\"Buying A Franchise Business\",\"Op-Ed\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2023\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs\",\"url\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs\",\"name\":\"Franchise Startup Costs: Are They Getting Too High?\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.thefranchiseking.com\\\/franchise-startup-costs#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.thefranchiseking.com\\\/wp-content\\\/uploads\\\/franchise-costs-high.jpg\",\"datePublished\":\"2023-03-08T18:57:49+00:00\",\"dateModified\":\"2026-04-27T14:39:22+00:00\",\"description\":\"Discover the shocking truth about franchise startup costs! 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