Building Costs for Franchises

Franchises proliferate many industries today – from restaurants to auto maintenance shops to hotels and retail stores. They’re everywhere – brands that occupy the buildings filling our small towns and cities. But what are the costs behind franchises – particularly with construction?

Many of the fees involved with franchises are actually on the franchisees. And the first fees for franchisees are buy-in costs. Franchisees have to be approved by the franchises upfront, before buy-in, based on their liquid funds or overall net worth. There are upfront professional costs as well – for services such as accounting or legal needs.

Building Costs for FranchisesSoon after however are construction “build out” fees. These apply to construction services where the builder executes the client’s needs by “building out” a space to meet the requirements. For franchises and franchisees, this means building out a space according to the franchise’s building specifications. Franchise offices or stores begin with a flagship location which gets built out and approved based on corporate brand specs. At that point, other locations can be built to copy or resemble the flagship building’s specifications.

Ongoing fees for the franchisee can include building rent, maintenance, utilities, loan interest, salaries and uniforms. There are also franchise fees and construction upkeep (which are sometimes shared or covered by the landlord).

Promotional fees are also vital, since there has to be promotion to increase awareness and business for this new franchise location. Some of the promotion and greater advertising is implemented by the actual franchise corporation – these costs are covered in the franchisee’s regular franchise fees. Still, the franchisee must build local, fresh awareness by paying for his or her location’s own promotion.

Even though the original branding is important (for building the franchisee’s new space to the franchise’s brand specifications) branding is not a once-and-done activity. Rebranding is vital to business – and applies to everything from building construction to advertising. Each several years rebranding can take place to upgrade a franchise flagship location to suit consumer desires and current trending. And once again the franchisees’ locations can be rebranded to fit the flagship location’s building specs. Industrial equipment, shelving, wall colors, lighting fixtures, flooring, furniture – even wall placements and other building elements can all be effected by rebranding.

The advantage to franchise ownership is that franchisees can obtain a clear understanding of what the overall business costs will be. These financial pictures are made available from other franchisees and the franchisor. Otherwise, traditional business startup fees are much harder to estimate – and they involve their own business growth, recognition and branding from square one. This also applies to construction costs – while franchise building costs are easily translated from flagship branding construction costs and applied to other franchise locations.

See more about Buildrite’s roll out construction services.