Published On: September 2, 2025
Category: Business Formation
The answer to this question is probably “what are your definitions of easy and inexpensive?” To the average newcomer to franchising, the answer is that it is not easy, can be costly, and can be very expensive if not done correctly.
Creation of the Franchise System
Regarding the creation of the Franchise Agreement and the Franchise Disclosure Document, the actual fees, expenses, and costs will vary depending on your industry and the need for professional assistance, which may include specialists such as attorneys, accountants, and other advisors as required. Generally, creating a franchise system from the ground up can cost between $20,000 and $80,000 for entity formation, trademarks, legal agreements, support documents, the Franchise Disclosure Statement, and financial disclosure forms.
Additionally, a more aggressive approach by the franchisor (such as one franchise versus multiple franchises) and any adjustments to previous relationships with potential franchisees (including, but not limited to, prior licenses, subsidiaries, or other existing relationships) will require additional fees and expenses to resolve.
Franchise Operations Manuals
Another frequently included document in a Franchise Disclosure Document is dated operating manuals. One must consider additional initial legal costs, including the revision or creation of operations manuals within the context of the franchise system, as well as between the franchisor and the franchisee, to address the interwoven and separate nature of the parties. Preparation of the operation manuals can range from $10,000 to $30,000 per manual.
Trademark Registration and Protection
In most instances, additional trademark registration and protection are initiated with the expansion of a franchising entity (which is usually the support entity) and its franchisees, as well as attendant service and equipment entities that may follow the franchise relationship. These services can amount to $5,000 or more per trademark, excluding the filing fee costs.
Corporation Formation and Financial Requirements
During the franchise development process, you will likely need to establish a new entity, as mentioned earlier, to serve as the franchisor. Due to the Federal Trade Commission’s Franchise Rule, you must produce audited financial statements. An accountant should be hired to prepare these documents and certify the financial statements, especially when creating a new entity with no previous financial records.
It is crucial to work strategically with both an attorney and an accountant to decide on the best corporate structure and advise on the most suitable entities for the franchise relationship. The cost for forming each corporate entity can range from $5,000 to $10,000, excluding filing fees. Audited financial statements typically cost between $2,500 and $10,000 or more.
Ongoing Annual Compliance Costs
Ongoing compliance is an aspect that is often overlooked by both the franchisor and the franchisee. There are ongoing legal and compliance costs that can run in the tens of thousands of dollars per franchise to cover Franchise Disclosure Document updates, other updates, renewals, and continuous legal and accounting monitoring and advice.
Bottom Line for Franchisors
Initiating Franchisors should budget $75,000 to $250,000 for initial franchise system development. The higher end reflects comprehensive systems or industries with complexities (doctors, dentists, and other regulated professions) with multi-state registration and robust operational infrastructure. The investment is significant but can be justified by the scalability potential of a well-structured franchise system.
Ready to Build Your Franchise System?
Creating a franchise is rarely simple or inexpensive, but with the right guidance, you can avoid costly mistakes and set your business up for long-term success. At Lantz Law Group, our attorneys provide strategic advice and comprehensive legal support for new and growing franchisors.
Contact us today at 720-571-8620 or fill out our online contact form to discuss your franchise goals and learn how we can help you build a strong, compliant system.
DISCLAIMER
The information contained in this FAQ available on the website lantzlawgroup.com is for general informational and educational purposes only. The information does not contain legal advice. Reading the information in this document or any materials on the lantzlawgroup.com website does not create an attorney-client relationship between you and the authors or Lantz Law Group. This document is not to be used as a substitute for competent legal counsel from a licensed provisional attorney in your state or country. If you need legal assistance regarding any of the content contained in this document, please get in touch with a competent and licensed attorney for assistance.