What a franchise actually costs in India
By CA Shrenuj Jalan · · 5 min read
The franchise fee is the smallest line in the budget. Here is the full cost stack — fit-out, deposit, stock, working capital and royalty — and how to read the numbers on any listing before you commit.
Most people ask "what is the franchise fee?" and stop there. The fee is usually the smallest number in the budget. What decides whether the outlet survives is everything sitting underneath it.
The six numbers that make up a franchise budget
1. Franchise fee. A one-time payment for the right to use the brand and its system for the term of the agreement. It is almost never refundable, and it is separate from your setup cost.
2. Fit-out and equipment. Civil work, furniture, signage, kitchen or workshop equipment, billing hardware. This is normally the largest single item, and it scales with carpet area — which is why every serious listing states an area range in square feet.
3. Security deposit. Two different deposits often apply: one to the franchisor (refundable or adjustable against royalty), and one to the landlord (commonly several months of rent). Ask which is refundable and on what conditions.
4. Opening stock. Inventory you must buy before day one, frequently from the franchisor or its nominated supplier. Ask whether re-ordering is also tied to a single supplier, because that decides your gross margin for the whole term.
5. Working capital. Rent, salaries, electricity and marketing for the months before the outlet breaks even. Underfunding this is the most common way a viable franchise fails.
6. Ongoing royalty and marketing contribution. Charged either as a percentage of revenue or as a fixed monthly amount. A percentage royalty is paid on sales, not on profit — it is due in a bad month too.
How to turn a listing into a real number
On this site every listing states investment as a range, plus the franchise fee, royalty, area and payback range separately. Read them together:
- Investment range tells you the total capital the brand expects, usually excluding your rent deposit.
- Franchise fee tells you how much of that leaves your hands before you sell anything.
- Area range multiplied by the rent per square foot in your locality gives you the rent that never appears in a brand's brochure.
- Royalty and margin together tell you what is left after the brand takes its share.
Add your own rent, deposit and six months of working capital to the brand's stated range. That total, not the headline figure, is what you need in the bank.
Payback is a claim, not a promise
A payback range is the franchisor's estimate under conditions it chose — a good location, a trained team, normal footfall. It is useful for comparing brands with each other. It is not a forecast for your site. Treat any payback figure under twelve months with more scepticism than one that is stated conservatively.
Questions to ask before you transfer anything
- Is the investment figure inclusive or exclusive of the franchise fee, deposit and GST?
- What exactly does the fit-out cost cover, and who appoints the contractor?
- Is the security deposit refundable at the end of the term, and under what deductions?
- Is royalty charged on gross sales or net sales, and is there a minimum monthly amount?
- Is there a separate marketing or technology fee?
- What happens to your investment if the agreement is not renewed?
Get the answers in writing before money moves. A franchisor confident in its numbers will not object.
Where to look next
- Franchise cost guide — the cost heads laid out side by side.
- Glossary — plain definitions of royalty, term, territory and the rest.
- Browse opportunities — every listing states investment, fee, royalty and area in the same format, so you can compare like with like.