Noam Galai / Contributor
- It costs more than $1 million to open a McDonald's or Wendy's franchise.
- Meanwhile, costs range between $219,000 and $2.9 million to open a Chick-fil-A franchise.
- Insider compiled a list of basic financial requirements to become a franchisee for 12 major fast-food chains.
Owning a fast food franchise can be a lucrative business.
One top performing Chick-fil-A restaurant reported sales of over $17 million in 2021, more than double the average per unit sales volume for the chain, according to Chick-fil-A's 2022 franchise disclosure document. Additionally, the average McDonald's restaurant logs about $4 million in yearly sales.
However, opening a franchise requires a hefty amount of cash to cover the startup costs. For example, you must have at least $500,000 in liquid assets to open a McDonald's and $750,000 to open a Taco Bell.
Additionally, franchisees have to pay ongoing monthly fees for royalties, advertising, and other services that can add up to more than 10% of gross sales – like KFC, which charges franchisees 5% royalty fees and 5% advertising fees. And, while the typical Chick-fil-A franchise can exceed $8 million in sales, franchise owners must pay 50% of their net profits to the chain.
Insider compiled a list of some basic financial requirements for becoming a franchise owner of 12 of the biggest fast-food chains in the US, listed in alphabetical order. The below values are based on "traditional" franchise locations, meaning they are stand-alone restaurants as opposed to units in airports, malls, universities, or other buildings.
Following the name of each restaurant chain are the average total startup costs to open one restaurant in the US.
Correction: March 20, 2023 — An earlier version of this story misstated the range of total startup costs for Arby's. It is between $628,950 and $2.3 million, not between $628,950 and $12.3 million.
AP
Total startup costs: $628,950 to $2.3 million
Minimum liquid asset requirement: $500,000
Minimum net worth requirement: $1 million
Franchise fee: $6,250 to $12,500 development fee, plus $0 to $37,500 license fee.
Ongoing fees: Arby's charges a royalty fee of 4% of sales and an advertising fee of 4.2% of sales.
Average per-unit sales*: $1.2 million
*2020 figures according to QSR Magazine.
Damian Dovarganes/AP
Startup costs: $230,000 to $4.2 million
Minimum liquid asset requirement: $500,000
Minimum net worth requirement: $1 million
Franchise fee: $50,000 for a 20-year franchise agreement
Ongoing fees: Burger King charges a 4.5% royalty fee and a 4% advertising fee (based on gross sales).
Average per-unit sales: $1.47 million
*2021 figures according to the chain's 2022 Franchise Disclosure Document.
Andrew Renneisen/Getty Images
Startup costs*: $219,055 to $2,912,697
Minimum liquid asset requirement: none
Minimum net worth requirement: none
Franchise fee: $10,000
Ongoing fees: Chick-fil-A franchisees pay a "base operating service fee" of 15% of sales and an additional fee of 50% of net profits. Chick-fil-A limits its rent charges to 6% of sales.
However, it's important to note that Chick-fil-A prohibits most of its franchisees from opening multiple units, which can limit potential profits, and franchisees must devote their full time and attention to operating the business. A Chick-fil-A spokesperson told Insider it selects "a relatively small number of franchisees to operate multiple units."
Average per-unit sales: Most locations average about $8.1 million in sales per year.
*2021 figures according to the chain's 2022 Franchise Disclosure Document.
WikiMedia Commons
Startup costs: $1.4 million to $2.4 million
Minimum liquid asset requirement: $400,000
Minimum net worth requirement: $750,000
Franchise fee: $45,000
Ongoing fees: Dairy Queen charges a 4% royalty fee and between 5% to 6% in marketing fees.
Average per-unit sales*: $912,000
*2020 figures according to QSR Magazine.
Nick Ut / AP Images
Startup costs: $526,900 to $1.78 million
Minimum liquid asset requirement: $250,000
Minimum net worth requirement: $500,000
Franchise fee: $40,000 to $90,000
Ongoing fees: Dunkin' Donuts charges 5% of gross sales for advertising fees and royalties fees between 2% to 6% of gross sales.
Average per-unit sales*: $930,000
*2020 figures according to QSR Magazine.
Wilfredo Lee / AP Images
Startup costs*: $1.4 million to $2.8 million
Minimum liquid asset requirement: $750,000
Minimum net worth requirement: $1.5 million
Franchise fee: $45,000*
Ongoing fees: KFC charges franchisees about 10% of gross revenues (5% for royalties and 5% for advertising).
Average per-unit sales**: $1.2 million
*According to Franchise Direct, which cited a 2019 KFC Franchise Disclosure Document.
**2018 figures according to QSR Magazine.
AP
Startup costs*: $1.36 million and $2.45 million. For new restaurants, the bulk of those costs cover signs, seating, equipment, and decor, according to the chain's franchise disclosure report for 2022.
Minimum liquid asset requirement: $500,000
Franchise fee: $45,000
Ongoing fees: The base rent varies as it depends on when the restaurant opened along with the acquisition and development costs. The rent for most new McDonald's restaurants ranges between 10% of total gross sales to $15.75% for new restaurants that have opened since January 1, 2020.
Additionally, there are numerous monthly and annual fees franchisees must pay, including a monthly service fee equal to 4% of gross sales and more than $11,000 in annual fees for support and maintenance of restaurant software and equipment such as payment processing systems and kiosks.
Average per-unit sales: $4 million
*2021 figures according to the chain's 2022 Franchise Disclosure Document.
Kate Taylor
Startup costs: $36,500 to $788,930
Minimum liquid asset requirement: $250,000
Minimum net worth requirement: $750,000
Franchise fee: $5,000 to $25,000
Ongoing fees: Papa John's charges a monthly royalty fee of 5% of net sales that is due on a monthly basis. Papa John's also requires that franchisees spend 8% of net monthly sales on marketing.
Average per-unit sales*: $1 million
*2020 figures according to QSR Magazine.
Hollis Johnson/Business Insider
Startup costs: $1.24 million to $3.53 million
Minimum liquid asset requirement: $500,000
Minimum net worth requirement: $1 million
Franchise fee: $30,000 of the $45,000 initial license fee credited via royalty.
Ongoing fees: Sonic charges a royalty fee of up to 5% of gross sales and advertising fees of at least 3.25%.
Average per-unit sales*: $1.6 million
*2020 figures according to QSR Magazine.
Wikipedia
Startup costs*: $222,050 to $506,900
Minimum liquid asset requirement: $100,000
Minimum net worth requirement: $150,000
Franchise fee: $15,000
Ongoing fees: Subway franchisees pay weekly fees based on gross sales, which include an 8% royalty fee and 4.5% fee for advertising.
Average per-unit sales: $434,000
*2021 figures according to Technomic
AP/Wilfredo Lee
Startup costs: $1.2 million to $2.9 million. This includes the franchise fee and other startup expenses such as real estate and construction. The costs are slightly lower — between $175,000 and $1.8 million — for franchisees to acquire an existing Taco Bell restaurant.
Minimum liquid asset requirement: $750,000 minimum
Minimum net worth requirement: $1.5 million
Franchise fee: $45,000 for a new traditional Taco Bell restaurant. Fees are lower ($25,000) for an in-line or end-cap restaurant.
Ongoing fees: Taco Bell charges a royalty fee equal to 5.5% of gross sales and a marketing fee equal to 4.25% of gross sales.
Average per-unit sales*: $1.6 million
*2018 figures according to QSR Magazine.
AP
Startup costs*: $1.2 million to $3.7 million for cash purchase; $556,500 to $1.1 million for financing; and $329,500 to $647,500 for leasing a restaurant.
Minimum liquid asset requirement: $500,000
Minimum net worth requirement: $1 million
Franchise fee: $50,000 for a 20-year lease
Ongoing fees: The advertising fee is 4% of gross sales and covers both national and local advertising. The royalty fee is 4% or 6% of gross sales, depending on the type of restaurant.
Average per-unit sales: $1.9 million for franchise locations.
*2021 figures according to the chain's 2022 Franchise Disclosure Document.