Restaurant Franchise Cost Guide: What You Need to Know About Investing in Restaurant Franchises

If you’re thinking about opening a restaurant franchise, the big question on your mind is probably: how much is this going to cost me? And it’s a valid concern. Franchising a restaurant isn’t just about flipping burgers or brewing lattes under a known name, but it’s about making a serious financial commitment, one that can pay off big-time if done right.

From upfront fees to monthly royalty payments, we’ll unpack every number you need to look out for, so you can start your franchising journey with eyes wide open and a clear game plan.

How much does it cost to franchise a restaurant?

Before we get into the actual numbers, there’s one document you’ll want to understand well: the Franchise Disclosure Document, or FDD. 

This document is required by the Federal Trade Commission (FTC) and is designed to give you a full, transparent picture of the franchise you’re considering so you can establish restaurant cost controls. It includes 23 sections, or “Items,” that cover everything from the franchisor’s background and legal history to startup costs, fees, restrictions, and financial performance.

The FDD is where you’ll find Items 7 and 19, two of the most relevant parts for cost and revenue expectations. Item 7 lays out estimated initial investment costs in detail, while Item 19 offers optional data on how existing franchisees are performing financially. You should review this document closely with a legal or financial advisor before making any commitments.

Now, the average total investment to franchise a restaurant in the U.S. usually falls between $150,000 and $2.5 million or more. That’s a wide range, and here’s why: every restaurant is different, and so is every market.

For example, if you’re franchising a sandwich shop in a mid-sized town, you might be looking at a smaller footprint and lower build-out costs. But if your dream is to open a full-service diner in a major city, expect that investment to climb quickly.

A few key factors will ultimately shape how much your restaurant franchise costs, and understanding these upfront can help you plan wisely and avoid surprises.

• Brand popularity: Well-known franchises like McDonald’s, Starbucks, or Chick-fil-A often come with higher franchise fees, stricter build-out requirements, and more expensive marketing contributions. You’re paying for the power of name recognition and built-in customer trust, but that premium can significantly bump your upfront costs.
• Location: Where you choose to set up shop matters a lot. Prime commercial real estate in cities like New York, Los Angeles, or Chicago is going to cost you more than a suburban strip mall in Iowa or Kansas. And don’t forget that rent, property taxes, and utilities vary widely from state to state.
• Type of restaurant: Not all restaurants are created equal. A QSR (quick-service restaurant) might need minimal seating and a compact kitchen, while a full-service steakhouse needs a larger footprint, more equipment, and a bigger team. The format you choose will impact your construction, staffing, and operational needs.
• Size of your space: A cozy 800-square-foot sandwich shop is naturally going to require less capital than a spacious 5,000-square-foot dine-in concept. Larger spaces mean higher build-out, furnishing, and utility costs, and potentially more staff on payroll.
• State-level rules: Each state has its own building codes, health and safety regulations, minimum wage laws, and licensing requirements. States like California and New York are known for more rigorous standards and higher costs, while states like Texas, Tennessee, or Mississippi may have fewer barriers to entry and lower ongoing compliance costs.

When you’re estimating your investment, be sure to factor in the local landscape. It can make or break your budget and your long-term profit potential.

Franchise fee and all fees involved in restaurant franchises

Now, let’s talk about the actual dollars and cents of franchising a restaurant. These costs aren’t just numbers on paper. They’re the stepping stones to opening your doors with confidence. If you’re budgeting for your first venture or adding another unit to your portfolio, it’s important to understand what these fees cover, how often you’ll pay them, and how they might change depending on where in the U.S. you’re setting up shop.

Most franchisors include these details in Item 7 of their Franchise Disclosure Document (FDD), and every fee listed here is a building block to help you plan smart, avoid surprises, and launch successfully. The figures below are compiled based on estimates from franchise portals like Franchise Direct and Franchise Business Review and financial data disclosed in multiple FDDs.

Franchise fee

This is your entry fee into the franchise system. The initial franchise fee gives you access to the brand name, the playbook, and the franchisor’s support network and information. Some franchises charge as little as $10,000, which is common with lower-cost food concepts like Subway. Others like McDonald’s or Dunkin’ may ask for $45,000 or more.

Keep in mind that this fee doesn’t cover your space, equipment, or staff. Also, states like California and Illinois require more detailed FDD registration, which sometimes gives you a clearer look into what your fee is paying for.

Real estate

Finding the right location can make or break your business. You can choose to lease or purchase your space, and costs vary wildly. For example, a storefront in a Texas suburb might cost $2,000 per month, while a similar spot in San Francisco or Manhattan could cost $10,000 or more.

You’ll also want to factor in real estate taxes, deposits, and possibly realtor fees. Every state has its own rules and property tax structures, so check with a local broker or commercial real estate agent to get a realistic picture.

Build-out and construction

Turning an empty shell into a recognizable, functional restaurant involves serious work. You’ll need plumbing, electrical, flooring, lighting, signage, and finishes that align with the brand’s aesthetic. In states like Massachusetts or Washington, strict building codes and inspections can stretch your timeline and budget.

In contrast, states like Florida or Georgia might offer more relaxed regulations, which could reduce your labor costs or speed up the permitting process. It’s smart to work with contractors who know local codes and restaurant standards.

Equipment and signage

Outfitting your kitchen and dining area takes a significant chunk of your investment. You’ll need everything from ovens and fryers to cash drawers, prep tables, and digital menu boards. Signage also matters, as a good exterior sign can bring in foot traffic and support your brand visibility.

Some franchisors want you to use specific suppliers, which might be more expensive than local vendors. It’s a good idea to inquire whether substitutions are permitted, especially if it might help you save money on your restaurant kitchen costs.

Initial inventory

This is your starter kit to get the restaurant up and running. It includes food, beverages, takeout containers, napkins, utensils, and cleaning supplies. If you’re opening a smoothie bar, your inventory might center around fruit, ice, and blenders. If it’s a pizza chain, you’re stocking up on cheese, dough, and sauces.

When calculating restaurant food cost, don’t forget that different states tax food items differently. For example, some states tax prepared food but not raw ingredients. Your local tax code may affect your first invoice.

Training fees

This is your onboarding bootcamp. Some franchisors include training in the franchise fee, but others charge separately. You might be required to attend in-person classes at corporate headquarters, which could mean covering flights and lodging too.

Your local health department may also require you to get certified as a food handler or manager, which adds a small cost but is important for passing inspections.

Marketing fees

This cost covers national ad campaigns like social media pushes and seasonal promotions. It’s usually calculated as a percentage of your monthly revenue. In addition to this, many brands ask franchisees to budget for local marketing, such as flyers, community sponsorships, or paid online ads.

Marketing effectiveness can vary by region. For example, billboard advertising may be effective in the Midwest, while digital campaigns perform better in urban areas with heavy online traffic.

Royalty fees

This is the percentage of your monthly sales that you pay back to the franchisor. Think of it as your membership fee for staying part of the brand. This is paid regardless of how much profit you make, so be sure to include it in your financial projections.

Some franchisors also charge higher royalties if you’re in a high-earning territory, so check your agreement for tiered fee structures.

Permits and insurance

Getting your permits and insurance in order is non-negotiable. You’ll need fire and health inspections, business operation licenses, and sometimes alcohol permits. This varies widely by city and state. For example, Los Angeles and Chicago have more comprehensive food safety rules than smaller cities in Nebraska or the Dakotas.

You’ll also need to carry insurance like general liability, workers’ comp, and property insurance. Make sure to compare state requirements, as some states have mandatory minimums for business policies.

Legal and accounting

These are the people who help you avoid expensive mistakes. A lawyer will review your FDD, help you understand your lease, and flag red flags. An accountant can assist with your business plan, forecast your expenses, and prepare for tax season.

Some states, like Michigan or New Jersey, also require that franchise agreements be filed or registered. This may create additional legal review needs.

Technology fees

You’ll need a restaurant point-of-sale system, kitchen display screens, back-office software, and sometimes customer loyalty apps. Some of these tools come with upfront hardware costs, while others have ongoing monthly fees.

In some cases, your state may tax SaaS software or charge extra sales tax on digital services, which could increase your monthly expenses slightly.

Which restaurant franchises are the most profitable?

While startup cost matters, what you really want is a good return on your investment. That means looking at average unit volume (AUV), ongoing costs like royalty and marketing fees, and whether the business model can be sustained long-term. You also want a franchise that fits your lifestyle, staffing ability, and local market.

Lower-cost franchises with strong performance

If you’re looking for restaurant franchises that balance moderate startup restaurant costs with solid returns, a few names stand out. Culver’s, for example, tends to have a higher initial investment, around $2 million, but its strong customer loyalty and high average unit volume (AUV), reportedly around $3.2 million in 2023, make it a favorite among franchisees who want a premium brand with proven demand.

Wingstop is another standout, particularly for its smaller footprint and focus on high-margin items like wings and fries. With an AUV of about $1.6 million in 2022 and simplified operations, it offers an efficient path to profitability for those looking to minimize complexity.

Firehouse Subs brings a more community-focused approach. It’s known for being mission-driven and easy to operate, with an average unit volume of around $900,000. That makes it a good fit for franchisees who want a straightforward business that also gives back.

Tropical Smoothie Cafe rounds out this group with a healthier menu concept and broad appeal among wellness-minded consumers. With startup costs ranging from roughly $277,000 to $584,000 and AUVs hovering around $1 million, it’s become an attractive option for owners looking to tap into the growing health food space.

High-volume franchise giants

Of course, if you’re aiming big and have the capital to match, the highest-earning franchises are still the household names. McDonald’s is often the go-to example, with average unit volumes consistently exceeding $2.5 million. The investment is steep, often well over $1 million, but it comes with global brand power and a deeply refined system.

Then there’s Chick-fil-A, which operates under a different model. You only need $10,000 to get started, but you don’t actually own the business. Chick-fil-A retains ownership and shares profits with you. Despite that, the payoff can be huge. Locations average more than $6 million annually, making it the highest-performing fast-food franchise by sales volume.

Nevertheless, no matter what brand you’re exploring, your actual profitability will come down to how well you run the store and how your market performs. Restaurant labor costs, rent, and customer traffic vary by city and state. For example, a McDonald’s in Los Angeles has a very different cost structure than one in Des Moines.

This is why Item 19 in the Franchise Disclosure Document is so important. It outlines historical sales data for franchise units and helps you forecast what’s realistic in your area. Use it, study it, and talk to existing franchisees in your region whenever possible.

How long does it take to break even?

One of the first questions you’re probably asking next is: how soon will I start seeing a return on everything I’m putting into this? And that’s a smart question. The truth is, break-even timelines vary depending on the brand, the format of the restaurant, your location, and how well you run the show. But let’s talk averages.

For most quick-service restaurants (QSRs), like Wingstop, Tropical Smoothie Cafe, or Firehouse Subs, you’re looking at a typical break-even range of 18 to 36 months. These brands usually require less square footage, leaner staffing, and faster build-outs, which means you can open sooner and start generating revenue quicker.

Full-service restaurants, or those with higher startup costs like McDonald’s or Culver’s, tend to have longer break-even periods, usually 3 to 5 years or more. Why? Because they often come with larger dining areas, more staff to train and pay, and more significant build-out requirements. But that doesn’t make them a bad investment; it just means your runway needs to be longer.

Your location can also make a huge difference. A busy spot in a city center may generate strong sales right out of the gate, but your rent, utilities, and labor costs are going to be higher. On the flip side, a franchise in a small town or suburban area might cost less to operate but take longer to build a steady base of loyal customers. It’s a balancing act, and your breakeven point will reflect that.

Beyond brand and location, there are other real-world factors that affect how fast you hit that break-even milestone:

Startup costs

The less you spend upfront, the less distance you have to cover to get back to even. For example, a smoothie shop with a startup cost of $300,000 might hit profitability within two years, while a large-scale burger franchise with a $2 million investment could take closer to five. These early financial decisions impact everything: your loan terms, your monthly obligations, and how much breathing room you have while growing your customer base. 

Being conservative with your build-out, choosing a modest location, and keeping launch expenses in check can significantly speed up your break-even timeline.

Operational efficiency

Every dollar you save through smart operations is a dollar closer to profitability. That means scheduling staff efficiently, keeping a close eye on inventory, reducing food waste, and minimizing unnecessary overtime. Even small adjustments, like switching to more accurate portioning tools or renegotiating with suppliers, can protect your bottom line and reduce the time it takes to recoup your investment.

Marketing and community engagement

Your grand opening isn’t just about balloons and discounts. It’s your first chance to make a lasting impression in your neighborhood. Franchisees who actively market their business, through social media, email campaigns, community events, and partnerships with local organizations, tend to see faster early traction. The more you invest in being visible and valuable in your community, the quicker customers start walking through the door.

Franchisor support

The best franchisors don’t just hand you a manual and disappear. They walk with you through the critical early months. Brands that provide detailed training, on-site launch support, regular check-ins, and access to operational experts tend to help their franchisees hit break-even sooner. If you’re new to business ownership, choosing a franchisor known for hands-on support can make a world of difference.

Seasonal and regional trends

Like in all businesses, geography matters. A location in a college town may boom during the academic year but slow down in the summer. Tourist-heavy areas can bring in big revenue spikes during vacation seasons but might require you to run leaner in the off months. Understanding these patterns ahead of time allows you to manage cash flow and staff scheduling better, which keeps you on track to break even when your revenue fluctuates.

You won’t find a guaranteed break-even date in your franchise agreement, but you can still make an educated guess. Use Item 19 in the Franchise Disclosure Document where it shows historical performance data from current franchisees. Look at units in markets similar to yours and ask yourself, “How does my situation compare?”

Better yet, reach out to franchisees already operating in your state or region to avoid common franchise problems. Ask them how long it took them to break even and what they’d do differently if they could go back. Those insights are often more valuable than any chart or projection.

At the end of the day, breaking even is just one milestone. If you’ve planned well, managed your budget, and picked a brand that aligns with your strengths, you’ll be in a strong position to grow both in revenue and confidence.

From fees to fries, serve success, and more

Franchising a restaurant can be a smart move, but it’s not a small one. You’re committing time, money, and energy into building someone else’s brand under your roof. But the good news is if you choose the right brand, understand your costs upfront, and manage operations well, you can build a successful, income-generating business.

As Ray Kroc, the man behind McDonald’s global expansion, once said, “The quality of a leader is reflected in the standards they set for themselves.” Franchising gives you a proven framework, but it’s your leadership and execution that bring it to life. Don’t skip the due diligence. Read the Franchise Disclosure Document carefully. Talk to existing franchisees. Work with professionals who can help you analyze the numbers. The more informed you are, the better your chances of success.

Ready to make the leap? Start by calculating your budget, then build your dream location from the ground up, one fee at a time. As your plan starts to take shape, it helps to look ahead at what comes after opening day. Even if you’re starting small, managing schedules and keeping your team organized can get overwhelming fast. Getting ahead with scheduling practices can save you headaches later and set a positive tone for your business. That’s where tools like 7shifts come in. They simplify how you manage shifts, track labor costs, and communicate with your team, making your day-to-day operations easier and more predictable.