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What Do Franchises Cost? Price Tiers And Where You Fit In

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If you’re interested in owning your own business, franchising can be a great option. Franchises offer many benefits over starting a business from scratch, including name recognition, training and support, and a proven business model. But how much do franchises cost? The cost of a franchise can vary widely depending on several factors, including the type of business. In this article, we’ll look at the different tiers of franchising to help you determine which price point is right for you. To get started, click here for Pirtek franchise tiers.

What Is The Benefit Of Joining A Franchise With Tiered Pricing?

One of the most significant benefits of joining a franchise with tiered pricing is that it gives you the ability to choose the level of investment that’s right for you. For example, if you’re interested in a hydraulic hose repair franchise but don’t have the budget for the Top tier, you can choose to join at the Low tier. This flexibility allows you to invest only what you’re comfortable with and still benefit from being part of a franchise.

What Are The Different Tiers Of Franchising?

Depending on the type of franchise, the number of tiers may start from two tiers and can go up to three or four. This article will focus on the scenario of a two-tiered hydraulic hose repair franchise.

TIER 1:

In Tier 1, you get everything the franchise offers, including name recognition, training, support, and a proven business model. Investment at this level gives a comprehensive package that ensures a higher chance of success. For instance, in the hydraulic hose repair franchise, a tier 1 investment comes with resources such as:

  • A physical store
  • Staff to run the store
  • Service vans for mobile repair

However, having these resources comes at a price, and the investment for this tier will factor in the following costs:

Your location’s rent and security deposit – If you won’t be owning the property, you’ll need to secure a location to house your business. This will come with a monthly rent as well as a security deposit.

Renovations to the leasehold property – Depending on the state of the property, you may need to do some renovations to get it up to franchise standards. This may include building out a workshop, shelving, and installing cabinets and furniture.

Equipment and signage at the shop – Outfitting your shop with the necessary equipment and signage is another cost to consider. This may include tools, workbenches, display cases, and a hydraulic hose repair franchise sign.

Initial franchise fee – When you first join a franchise, you’ll need to pay an initial fee. This fee goes towards covering the costs of getting you set up as a franchisee, such as providing you with training and support. You can view the franchising fee as a licensing fee allowing you to use the franchisor’s name and business model.

Depending on the franchisor, the initial fee can range from $413,300 to $899,300.

TIER 2:

Now let’s look at the investment for a tier II franchise. When you join at this level, you’re still getting all the benefits of being part of a franchise. However, the investment at this level gives you the flexibility of joining the franchise at a lower budget.

However, because of the lower budget, tier 2 investment comes with fewer resources. For example, a tier II investment in the hydraulic hose repair franchise is designed to provide mobile service only. So, there will be no need for a physical store or workshop. Some of the expenses you can expect at this level include:

A mobile sales and service unit – This is a van that’s outfitted with the necessary equipment to do on-site repairs.

Computer systems and software – You’ll need a computer to manage bookings, invoicing, and stock. The franchisor will provide you with the necessary software to do this.

Initial franchise fee – As with the tier I investment, you’ll need to pay an initial franchise fee.

You should expect to pay up to $265,000 to join a tier II franchise.

The benefit of this setup is that you have the opportunity to scale up your business to tier I level by reinvesting your profits and adding a physical store when you’re ready.

Additional startup costs

Besides the costs mentioned above, you’ll also need to factor in some additional startup costs. These include:

  • Insurance
  • Legal fees
  • Accounting
  • These costs will vary depending on the franchise you choose as well as the location of your business.

Now that you know the different franchise tiers and what they cost, you can decide which level of investment is right for you. Keep in mind that the initial investment is just a starting point. You’ll also need to factor in additional costs such as insurance, legal fees, and accounting. But with the help of a franchisor, you can get your business up and running quickly and with less risk than going it alone.


More on this topic:

Why Franchise Businesses Are So Popular

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