To make money, you have to spend money, but what exactly does that mean when it comes to starting a franchise?
If you’re wondering, “how much does a franchise cost?” then you’ve come to the right place.
On most franchisors’ websites, you’ll find approximate costs of starting a franchise business, but you may not get all the details right off the bat. Our website is no different—we tell you how much it usually costs to start up our home care franchise (on both the low and high end), but we don’t give you exactly how everything breaks down.
It’s not because we (or other franchisors) are hiding something from you—it’s because costs can vary from region to region. Some places cost more or less depending on the franchise territories or the model you choose.
Well, and also, that would be a lot of information to read in one place.
In this article, we will break down the general startup costs for most franchises and then provide a real-life example of how much a home care franchise costs under our traditional franchise concept model. We hope this will ease some of your confusion by giving you a better idea of what costs would look like for a specific franchise organization.
General Franchise Fees
With so many various franchise businesses, we will focus on the general franchise fees you can expect to see across various franchise businesses.
Whether your franchise of interest is a home-based business, mobile, or has a physical location with staff and inventory, you can always expect that there will be an initial investment fee ranging between as little as $5,000 to as much as a million or even as high as five.
This generally covers the startup costs and access to the franchise brand, operating systems, and training for that particular franchise company.
From there, additional costs for getting the franchise up and running, along with general ongoing business costs. Here is a general list of franchise fees that may also arise when starting your own business under a franchise system:
- Start-up inventory—this may or may not be included in the initial franchise fee but depending on the type of franchise, you may need inventory to provide the service or product.
- Ongoing marketing fees—usually between 2-4% of revenue for marketing support from the franchisor.
- Business license—depending on your state or province, you’ll need to purchase a business license to operate legally.
- Insurance—like many businesses, you’ll need insurance to cover yourself from liabilities.
- Construction costs—there may be construction costs if a physical location is needed.
- Advertising fund—many franchisors will allow you to opt in voluntarily to receive additional advertising support.
- Rent—again, if a physical location is required, you’ll want to factor in rent costs.
- Operating equipment—general operating equipment, such as kitchen equipment, office furniture, or even general office supplies.
- Royalty fees—an ongoing yearly fee that goes to the franchisor, usually between 4-8% of gross revenues.
- Employee training—if your business requires a staff, you’ll need to cover the costs to train them.
- Professional fees—the costs of a lawyer to review the contracts and disclosure document.
The Franchise Agreement and the Franchise Disclosure Documents Are Your Resources
As you can guess, the startup costs can vary within that list of fees depending on the franchise system and business.
With that being the case, you’ll want to get to know the franchise disclosure document and franchise agreement inside and out. We highly recommend hiring a franchise attorney to review your documents. That way, you will fully understand each and every cost associated with operating the franchise location.
Firstly, the franchise disclosure document is a legal document given to a prospective franchisee as part of the due diligence process before purchasing a franchise. It will outline all the costs associated with the business along with the franchise’s history, such as any bankruptcy or legal issues, general financial statements, and an outline of what the relationship between the franchisee and franchisor will look like.
On the other hand, the franchise agreement is the contract both parties will agree to and sign to begin the official partnership between the franchisee and franchisor. As this is a legally binding agreement, you’ll want to fully understand what you are signing by having a lawyer review the agreement. The exact franchise fees you will now be responsible for will be stated in the agreement.
Now, let’s get into a real-life example that will help you better understand what these fees look like applied to a home care business: Nurse Next Door.
Home Care Franchise Cost Example: Nurse Next Door
Before we explain each line item, you should know that only two fees go directly to Nurse Next Door: the franchise fee and the technology start-up fee. Everything else supports third-party vendors, suppliers, and other partners necessary to ensure your health care business is safe, legal, and operationally efficient.
To see the individual fees of starting a home health care business, take a look at our start-up costs table.
Initial Franchise Fees
This fee gives you access to the Nurse Next Door name and brand, systems, training, onboarding, and protected territory you’ll need for your franchise.
It gives us the bandwidth to provide you with the initial support and training you’ll need to get set up for success and the proven business systems we use across the board.
Technology Start-Up Fee
You’ll get access to Nurse Next Door’s centralized, world-class Care Services Center (one of the best investments you’ll make), as well as the software and technology infrastructure and licenses to launch and operate your business.
Pre-Opening Branding and Promotion
Establish the brand in your community! This fee includes initial marketing materials plus the estimated cost to wrap your first Nurse Next Door vehicle.
Initial Training Program
While access to Nurse Next Door’s training is included in your initial franchise fee, this investment covers travel, meals, and accommodations for your 5-day onboarding program in Vancouver.
Office Equipment and Supplies
This fee leaves room for you to make sure you have the right equipment for your office, whether it’s desks, chairs, or printing supplies.
Legal & Accounting
To operate a health care business properly, you’ll need professional legal and accounting services. This fee will pay for an exceptional franchise lawyer and for setting up your corporate documents.
If you’d like to rent office space (or if your state requires you to have a physical office), this is included in the start-up budget.
You’ll need to turn on the lights!
After starting your new home health care business, you’ll need to invest in local branding. From online PPC (Pay-Per-Click) campaigns to offline materials like signage or decals, this covers it. You’ll need the budget for marketing and community engagement activities—basically, anything you need to be more visible in your area.
Insurance (Excluding Worker’s Compensation)
This includes liability and other critical coverage. We have a world-class policy and supplier to protect you and your business.
Worker’s Compensation Insurance
This includes worker’s compensation coverage. We have a world-class policy and supplier to protect you and your business.
This is to invest in a new vehicle (to wrap in the Nurse Next Door brand, of course) if you don’t already have one.
Computers and Related Peripherals
You’ll likely need a laptop, a printer, and possibly a second cell phone. This fee accounts for all of those.
License & Permits
To operate a home care business, you’ll need certain licenses (which vary by state or province). You’ll also need a business license. That’s what this is for.
Consultant and/or Director of Nursing
You’ll likely hire a consultant and/or Director of Nursing to help with aspects of your business, such as care.
We’ll help you get your business certified with the proper credentials.
$0-100 (for first three months) 12¢ per call
This is the system used to monitor caregiver attendance in real-time.
Additional Branding Collateral
If you need to replenish marketing materials (pro tip: you will), or you’d like additional marketing pieces, this fee should cover it all.
Additional Funds—3 to 6 Months of Working Collateral
You’ll need enough capital to pay caregivers and suppliers as you grow. If your expenses outweigh your revenue at the very beginning, you will want to budget for working.
Can You Afford a Home Health Care Franchise Business?
Total Approximate Cost: $109,000-161,700
Whether you’re making the investment alone, want to go in on it with a partner, or want to get approved for a loan before jumping in, franchise ownership is more affordable than you think. Considering the benefits you get during the startup process, it’s a rewarding venture to embark on!
Join a world-class brand where you’ll be surrounded by passionate people just like you. Learn more here.
How much does a franchise owner make a year?
The answer to this can vary greatly among franchised businesses. However, the most successful franchises of in-home care businesses can make upwards of $150,000 annually.
Are franchises a good investment?
Yes! Like any business, your investment can pay off greatly if you have the grit, tenacity, and passion for delivering the best product or service to your customer. The same applies to a franchise business but with an even greater likelihood of having success as a proven business model backs you.
Are there discounts on franchise fees?
Many franchisors do offer discounts to create access to various groups. Usually, these reduced fees can be found on the franchise website, with most franchisors offering discounts to veterans, friends, and family, and in the case of Nurse Next Door, Frontline Workers.
Disclaimer: This information is excerpted from Item 7 of our Franchise Disclosure Document with an issuance date of November 30, 2016, in US dollars. This is the latest version of our Franchise Disclosure Document. This version may not be currently registered in any or all franchise registration states. We will make an application to register it in all registration states in due course as required under applicable law.