What coffee shop franchise costs should you expect? We break down the upfront investment and ongoing costs you should budget for.
Franchise Costs to Expect
As you research franchise opportunities, you’ll notice there are different expenses to be aware of. The easiest way to categorize these is in two groups: initial and ongoing costs.
Examples of initial costs include:
- Franchise fee: This is the first expense you’ll need to pay to a franchisor after signing the franchise agreement. Payment of this fee allows you the right to use the franchisor’s branding and business model. Additionally, this fee funds the support you’ll receive from headquarters throughout the process of opening your location. It takes a lot of time, effort, and money to get a new location running. Initial franchise fees can range between $20,000 and $50,000.
- Initial investment: This is the estimated cost associated with starting your franchise location. This includes everything from construction to inventory. The initial investment is typically listed in a range because costs can vary depending on the location and size of your franchise. Often the initial investment range includes the franchise fee. A full breakout of the startup costs can be found in Item 7 of the Franchise Disclosure Document (FDD).
- Territory fee: This type of fee isn’t as common, but some franchisors do charge a territory fee. This is to ensure the rights to a certain area – meaning no other franchisees from the brand can open a location in that territory.
After your location is open, there are additional coffee shop franchise costs you’ll be required to pay as part of your franchise agreement. Some examples of these ongoing costs include:
- Royalty fees: Sometimes franchisors will charge a set dollar amount monthly, but typically this type of fee is a percentage of a location’s gross sales. The purpose of royalty fees is to fund the expenses associated with operational systems, training, and ongoing support provided to franchisees throughout the duration of their agreement.
- Ad royalty fees: A sub-set of royalty fees is the ad royalty fee. Similar to royalty fees, franchisors can require a set dollar amount to be paid, but many opt for a percentage of gross sales. Typically, advertising fees are less than royalty fees. Some of these dollars go toward research and product development, but the majority of the funds go toward marketing campaigns.
- Business operating costs: It may seem obvious, but it’s important to keep in mind that you’ll need to account for general operating costs. This will include rent – if you don’t own the building your business is in – as well as payroll, maintenance, and inventory fulfillment orders.
Coffee Shop Franchise Costs at Scooter’s Coffee
Scooter’s Coffee® is a leading coffee franchise with over 600 locations nationwide. Our drive-thru only coffee kiosk model is only 664 square feet. A compact footprint means our franchisees can take advantage of reduced payroll and maintenance costs.
The initial investment costs to open a Scooter’s Coffee kiosk range between $794,000 and $1,341,500, which includes our $40,000 franchise fee. We require our franchisees to pay a 6% royalty fee and a 2% advertising fee throughout the life of their franchise agreement. Franchise candidates interested in owning a Scooter’s Coffee franchise should have a minimum net worth of $500,000 and at least $200,000 in liquid assets.
Of course, when analyzing costs associated with a business opportunity, it’s also important to look at the earning potential. While you can’t predict your exact coffee shop profits, you can examine a brand’s financial health by reviewing Item 19 of the FDD. Keep in mind that no franchisor can guarantee earnings of any kind. However, the financial representations listed in Item 19 will help you understand the overall health of the franchise system.
In 2022, the top 25% of franchise locations saw an average unit volume (AUV) of $1,276,780.* The system overall had an AUV of $885,335. To learn more about our coffee shop franchise costs and overall opportunity, request information today.
*This is historical representation of what some of our franchised stores earned as described further in Item 19 of the FDD. This information is based upon 66 of 264 Drive-Thru Kiosks that were open during the entire 2022 calendar year and provided complete information. Your results may differ. There is no guarantee you will stay in business that long or that you will achieve the stated levels of same-store sales growth within that time period. See Item 19 of the FDD for more information.
