Franchise opportunities in the food industry are vast these days, ranging from fast food restaurants, food trucks, restaurant chains, ice cream parlors, and even food kiosks.

Here's a look at some of the cheapest restaurant franchise opportunities from New York to LA and what they’ll cost you to open.

Understanding Restaurant Franchise Fees

Restaurant and fast food franchise fees vary, but often include upfront fees paid to the franchisor to establish the franchise location and potential ongoing fees that vary by business. In terms of affordability, a restaurant franchise can be either cheap now, cheap relative to expected royalties and fees, or cheap overall. Be sure that you understand the franchise fee structure before entering an agreement so that you can get the cheapest franchise possible.

Upfront Fee

Your initial franchise fee, paid at the beginning of your contract, is typically the largest single investment you will make when opening a franchise. Similar to a down payment, this fee locks in your franchise rights and, in many cases, reserves a specific service area for your future restaurant location.

This fee helps cover many services that the parent franchisor provides for franchisees, including marketing materials or training. While these might be more expensive than the startup costs for a comparable non-franchise business, you wouldn’t likely get the same upside or business traffic without using the franchise name and marketing.

Upfront fees can also appear in other types of transactions, too.

• If you buy a franchise from another franchise owner, you may have to pay a transfer fee.
• Some contracts have recurring renewal fees, which involve paying a fee to a franchisor every year.

A low-cost franchise fee attracts a wider pool of investors and franchisees, making a franchise more accessible to a larger audience and encouraging quick growth. On the other hand, some franchisors may purposely set a high upfront fee to only attract investors willing to make a large commitment of their capital and time.

Royalties

Franchises are often required to pay royalties monthly or even weekly, usually measured as a percentage of gross profit. This fee goes toward supporting the marketing and advertising efforts of the parent company and to maintenance of the brand.

Gross profit is calculated by subtracting the cost of goods (like food production and delivery) from gross sales. Royalties will be a percentage of that number, often ranging from as low as 4% to as high as 12% or more.

Not all of the royalties you pay to a franchisor will be based on gross profit, however. Some of the percentages might be based on revenue, pre-tax profit, etc. depending on the franchise you own and the exact nature of your agreement.

Advertising Charges

Another recurring, percentage-based charge is your advertising fee, which supports advertising your franchise through the franchisor’s network, website, and more. This charge is usually lower than the royalty fee but still contributes to your future expenses.

Additional Set Up Costs

Each franchise has certain obligations when starting a chain store and maintaining consistent brand recognition. This typically means following certain guidelines related to the store’s layout, decorations, and style.

Other setup costs include getting the required supplies, materials, and inventory for your franchise restaurant. You may need to buy company-approved or -branded supplies, depending on your franchise agreement.

Cheapest Restaurant Franchises

Now that you understand the typical cost structure of restaurant franchise agreements, let’s look at the cheapest restaurant franchises available today. Keep in mind that the low-cost nature of these agreements might be contained in either the upfront cost, ongoing fees, or both.

Baskin Robbins

• Franchise Fee: $25,000
• Initial Investment: $90,000 to $625,000
• Net Worth Requirement: $100,000 to $200,000
• Liquid Asset Requirement: $100,000
• Royalty Fee: 5.9% of Gross Monthly Sales
• Advertising Fee: 5% of Gross Monthly Sales

Everyone loves ice cream! While not a traditional restaurant franchise, Baskin Robbins is a popular ice cream parlor that can turn a profit with lower costs.

Baskin Robbins is a relatively affordable franchise with net worth requirements between $100,000-$200,000 and a liquid asset requirement of only $100,000. The upfront franchise fee is only $25,000. This could be a great option if you don’t have a lot of capital available or don’t carry liquid assets.

The overall estimated investment for a Baskin Robbins restaurant opening ranges from approximately $90,000 to $625,000. Opening Inventory costs around $5,000-$8,000 and technology can range from $1,440 to $15,000. Together, these contribute to a relatively inexpensive initial investment, compared to other franchises.

The ongoing fees for Baskin Robbins are pretty average, too. Expect a 5.9% royalty fee and a 5% advertising fee based on. For the first few years, royalty fees are reduced to 2.9% (year one), 3.9% (year two), and 4.9% (year three), saving you even more money.

Chick-Fil-A

• Franchise Fee: $10,000
• Initial Investment: $343,000 to $2,000,000
• Net Worth Requirement: $10,000
• Liquid Asset Requirement: $10,000
• Royalty Fee: 15% of Gross Monthly Sales + Possible 50/50 split of remaining pre-tax profit

Famous for its delicious fried chicken, dipping sauces, and efficient drive-thru lines, there’s no denying that Americans love Chick-Fil-A. The Chick-Fil-A business model has been proven time and again with great sales and a loyal customer base, too, so it’s almost certain to be a great investment.

To get a Chick-Fil-A restaurant, potential franchisees must apply through a selective recruitment process. Once accepted, prospective operators only have to commit $10,000 as an initial investment; Chick-Fil-A then pays for the construction and equipment going into the business, turning around and renting it back to the business owner. The charge for this is a 15% royalty, and the remaining pre-tax profit margin is subject to a 50/50 split between the franchisor and the franchisee.

Taco Bell

• Franchise Fee: $25,000 to 45,000
• Initial Investment: $530,000 to $3,000,000
• Net Worth Requirement: $1,500,000
• Liquid Asset Requirement: $750,000
• Royalty Fee: 5.5% of Gross Monthly Sales
• Advertising Fee: 4.25% of Gross Monthly Sales

Offering Mexican food in a fast-casual setting, Taco Bell is a known brand across the country with thousands of franchise locations. For potential franchisees, Taco Bell has an upfront fee of between $25,000 and $45,000, which is competitive compared to other brands out there.

Their ongoing fee structure is also reasonable, with a royalty fee of 5.5% of gross sales and an advertising fee is 4.25% of gross sales. This is pretty reasonable compared to other restaurants.

It’s important to note that a net worth of $1.5 million or more is required to qualify. The startup costs for acquiring real estate, building a Taco Bell location, and stocking initial inventory can be quite significant.

Papa John's

• Franchise Fee: $5,000 to $25,000
• Initial Investment: $200,000 to $750,000
• Net Worth Requirement: $750,000
• Liquid Asset Requirement: $250,000
• Royalty Fee: 5% to 6% of Gross Monthly Sales
• Advertising Fee: 8% of Gross Monthly Sales

Papa John's has relatively lower startup costs and might be a great franchise for you if you’re looking for a popular pizza chain.

Papa John’s has certain requirements for franchisees. First, you must have liquid assets totaling at least $250,000 and a minimum net worth of $750,000 to be considered. They also prefer that you have multi-unit management or retail experience before applying. Specifically, they write that Papa John’s wants people willing to open and manage five locations or more, ideally with partners, which is no small ask.

New Papa John’s pizza franchise owners have two investment options: Traditional and Non-Traditional. The traditional route has a $25,000 franchise fee with a 6% marketing fee and 5% royalty fee on net sales. The non-traditional route has a franchise fee of just $5,000, but charges a 5% to 6% royalty fee (depending on whether you’re in a small town) along with a 25% marketing fund fee.

SONIC Drive-In

• Franchise Fee: $30,000 to $45,000
• Initial Investment: $1,714,000 to $3,370,000
• Net Worth Requirement: $1,000,000
• Liquid Asset Requirement: $500,000
• Royalty Fee: 1% to 5% of Gross Monthly Sales
• Advertising Fee: 3.25% of Gross Monthly Sales

SONIC Drive-In is a classic American drive-thru restaurant with carhops, drive-up stalls, and a wide menu of classic foods and treats. In addition to offering a quick-service restaurant experience from your car, SONIC is also relatively cheap to start as a franchise owner.

To secure one or two SONIC Drive-In franchise locations in one of the 45 states in which it operates, you’ll need at least $500,000 in liquid assets and a net worth of one million dollars or more. If you want to own three or more locations, those requirements are doubled.

While liquidity and net worth thresholds may be high, the SONIC franchise fee is competitive at between $30,000 and $45,000. Royalty fees range from 1% to 5% and the advertising fee is a low 3.25% (with some new franchisees paying a temporarily discounted rate).

It's important to note that the total cost of opening a new SONIC Drive-in is typically over a million dollars once you factor in real estate and franchise costs. From the fees you pay to SONIC corporate to the cost of building out, stocking, and training your location, the investment is pretty steep. When it comes to your upfront payments to corporate, though, buying into a SONIC franchise is pretty cheap.

Dunkin

• Franchise Fee: $40,000 to $90,000
• Initial Investment: $526,000 to $1,809,000
• Net Worth Requirement: $500,000
• Liquid Asset Requirement: $250,000
• Royalty Fee: 5.9% of Gross Monthly Sales
• Advertising Fee: 5% of Gross Monthly Sales

Recently rebranded to Dunkin’, Dunkin’ Donuts has been a popular coffee and donut franchise since its introduction in 1948. Over the last 75+ years, Dunkin' has expanded to many franchise locations, aided in part by its relative affordability. The cafe brand offers traditional franchises, like standalone storefronts, as well as non-traditional franchises like stadium and airport shops.

To open a Dunkin’ franchise, you should have a net worth of at least $500,000 and liquid assets of $250,000 or more at your disposal. Keep in mind that these are the minimum requirements, so more may be required depending on your franchise agreement and store plans.

The initial franchise fee is between $40,000 and $90,000, which is slightly higher than some others in this list. However, long-term costs for a Dunkin’ franchise are also pretty cheap, with royalty fees of 5.9% and an advertising fee of 5%. Corporate’s overall estimation of your startup costs ranges from $526,000 to over $1,809,000.

KFC

• Franchise Fee: $22,500 to $45,000
• Initial Investment: $1,200,000 to $2,500,000
• Net Worth Requirement: $1,500,000
• Liquid Asset Requirement: $750,000
• Royalty Fee: 5% of Gross Monthly Sales
• Advertising Fee: 5% of Gross Monthly Sales

Kentucky Fried Chicken, or KFC for short, is a fast food chain focused on serving delicious fried chicken dishes to customers on the go. It has more than 4,000 locations across all 50 states, with the vast majority being franchises.

To purchase a KFC franchise, you’ll need to have a net worth of at least $1,500,000 and at least $750,000 in liquid assets. These steep requirements may turn many people away from the KFC franchise application, though the company remains a competitive option in terms of fees.

KFC charges an upfront franchise fee of $45,000 at the signing of the franchise agreement, which includes both a deposit fee and an option fee. If you decide to open a non-traditional location — such as a shop in an airport or mall — your fee may be as low as $22,500. KFC has a royalty fee of 5% that goes to corporate as well as an advertising fee of 5%. These fees are quite modest in comparison, though the company estimates your total initial investment as a franchisee to be somewhere between $1,400,000 and $2,770,000.

Financing a Restaurant Franchise

There are a few different ways to purchase a franchise in America, depending on factors like the type of restaurant franchise you want. There are options like a stadium kiosk pizza franchise like Domino’s or Pizza Hut, or a standalone sandwich shop like Subway or Jersey Mike's.

Then, look at your financials, including your net worth, liquid assets, and how much you can afford for your initial investment cost. A franchise with a low investment cost may feel cheap initially, but high costs paid to corporate can make it more expensive in the long run.

Your idea of the perfect cheap restaurant franchise might be one with higher startup costs in the beginning followed by lower ongoing costs as the years go on. It may be more valuable to buy an inexpensive franchise with a low startup cost today, rather than lock in a more costly franchise with an inexpensive ongoing cost.

Financing Options for a Restaurant Franchise

Financing some of your startup costs can help make your restaurant franchise dreams accessible, even if you don’t have the cash to buy, build-out, and open your first restaurant. Depending on the company, franchisors sometimes allow you to finance certain costs of the franchise including your franchise fee, marketing fees, or even your location’s build-out.

Some costs may already be included in your franchise agreement, too, like the lease or purchase of specific equipment you will need for operation. While you might have to provide some downpayment toward this equipment, it will usually make your upfront cost much lower.

Outside Financing for a Restaurant Franchise

If you aren’t happy with the financing options your franchisor offers, consider a small business loan or line of credit to cover some of the more expensive costs. Available through banks and other business lenders, outside financing can help you pay for a range of upfront and ongoing franchise costs.

Just be sure you comply with any requirements written into your franchise agreement. These terms may limit how much you can borrow or what those borrowed funds can be used toward.

Takeaways

Opening and running a franchise is not cheap, with both upfront costs and long-term royalties to consider. Every franchise has its own business model with a unique fee structure that is slightly different from the rest, so it’s important to read the fine print of any franchise agreement carefully before signing on the dotted line.

That said, some franchises are definitely cheaper than others, and some make it easier to get your foot in the door even if you don’t have a ton of capital to put up. When searching for the cheapest restaurant franchise, be sure to look at your upfront franchise fee, total initial investment, royalty fees, and ongoing advertising fees to get the full financial picture.

FAQs

Do franchise restaurants make money?

Opening a franchise restaurant can be a great way to make money and enjoy the benefits of an established company name. However, becoming a franchisee also involves certain extra costs such as an initial franchise fee, ongoing royalty fees, and even marketing/advertising costs paid back to the parent company each year.

How much does a restaurant franchise cost?

Investors will typically pay an initial franchise fee, ranging from about $10,000 to $45,000 or more, to lock in and open a location. Once established, franchisees are also responsible for paying royalty and advertising fees back to the parent corporation, usually calculated as a percentage of their revenue.

Why does it only cost $10,000 to open a Chick-Fil-A?

In terms of upfront costs, Chick-Fil-A is a relatively cheap restaurant franchise to open with just a $10,000 franchise fee. However, potential franchisees must also meet stringent requirements to qualify, looking at things like their experience and personal financial history.

What are the top restaurant franchises in the world?

According to a recent report from Entrepreneur, the top five most profitable franchises worldwide are KFC, Taco Bell, Pizza Hut, Dunkin’, and McDonalds. Each franchisee’s success will depend on factors like their location, market, and even commitment to the brand, however.

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