What hidden costs that should I watch out for in a franchise?

While some costs like franchise fees, advertising fees and ongoing royalties, are not a surprise, there are others that you may not have considered.

These can include:

Training – most brands include the training, but you may still have to pay for travel, a hotel and food for you and your team.

Technology – some brands have an ongoing cost to use their POS (point of sale) system, proprietary software or scheduling software.

Legal and accounting fees – this is an absolutely necessary cost for contract review and due diligence before signing the franchise agreement.

Grand Opening – some brands require franchisees to invest in an event or promotion for their opening.

Renewal – franchise agreements are for a specific number of years, and most offer a renewal option at the end of the term. In most cases, there is a renewal fee to do this, so you’ll want to be sure to have this clarified within the initial contract.

Transferring Ownership – if you want to sell your franchise, there will generally be a fee to do this.  Also check the agreement ahead of time to be sure of the rules around selling or transferring the business.

Renovation – Occasionally, franchises overhaul their look, and franchisees may be on the hook for the cost of renovations. Before signing a contract, ask when the most recent brand overhaul happened, and if brand updates requiring renovations are likely to happen in the first few years of your contract.

Always budget about 20-30% extra, just to be safe.