What is a food franchise fee, and what does it cover?
The initial franchise fee is what you pay the franchisor for the right to open a unit under its brand, usually covering access to the system, initial training, site or opening support and use of the trademarks. It is separate from the build-out, equipment, inventory and ongoing royalties. The amount and what it includes appear in Item 5 of the Franchise Disclosure Document.
Food franchise costs usually break into layers:
- Initial franchise fee: the upfront fee disclosed in Item 5.
- Initial investment: the total estimated cost to open, disclosed in Item 7, including the fee, build-out, equipment, signage, opening inventory, training travel and additional funds for the early months.
- Ongoing fees: royalties, marketing fund contributions and technology fees, disclosed in Item 6.
Brand figures change, so always use the current disclosure document from the franchisor. This article does not quote any brand's fees, and Restaurant Capital Now is not affiliated with any franchisor.
Is the franchise fee usually financed on its own?
Rarely on its own. The fee has no physical collateral, so most funders prefer to include it in a broader package for the whole unit, where the equipment, build-out and the operator's overall strength support the deal. Existing franchisees with strong unit sales sometimes have more flexibility, because their current restaurants' deposits can support funding for the next fee.
Common ways the fee ends up funded:
- Inside an SBA-backed loan for a new unit, subject to program rules and the lender's review. See SBA loans for restaurants.
- Inside a term loan that covers the fee plus build-out and soft costs. See restaurant term loans.
- From owner cash, while funding covers equipment and construction.
- From existing unit cash flow for multi-unit operators adding locations.
| Cost | Where to find it | Typical funding approach |
|---|---|---|
| Initial franchise fee | Item 5 | Owner cash or inside a larger package |
| Total initial investment | Item 7 | Mix of owner cash, loans and equipment financing |
| Royalties and marketing fees | Item 6 | Paid from ongoing sales |
| Equipment and build-out | Item 7 estimates plus local quotes | Equipment financing and term or SBA-backed loans |
Do franchisors require the fee to come from personal cash?
Some do, some do not, and many set minimum liquid capital and net-worth requirements that you must meet with your own assets. Borrowed money usually does not count toward those requirements. Separately, lenders and programs may expect a portion of the total project to come from the owner. Check the franchise agreement, ask the franchisor directly and confirm with your funder.
Keep three questions separate:
- Franchisor approval: do you meet the brand's liquidity and net-worth requirements?
- Fee payment: does the franchisor restrict how the fee is paid?
- Funder expectations: how much owner cash does this funder or program expect in the project?
Have a franchise attorney review the agreement before you sign. This article is not legal advice.
When is the franchise fee due, and why does timing matter?
The fee is often due when you sign the franchise agreement, which can be months before you have a site, a lease or a funding approval for the build. That timing gap is why many first-time franchisees pay the fee from savings. If you plan to finance it, understand the franchisor's signing timeline and your funder's review timeline before committing.
Item 5 of the disclosure document typically describes when the fee is due and whether any part is refundable. Build a timeline that lines up signing, site selection, lease negotiation, funding review and construction. SBA-backed loans usually take longer than other products, so franchisees with tight deadlines often compare faster options for parts of the project. See how fast a restaurant can get funded.
What do funders look at for a franchise fee and new unit?
Requirements vary by product and funder; many look at time in business, monthly revenue and credit. For new franchisees, funders typically focus on personal credit, liquidity, restaurant or management experience, and the franchise agreement. For existing franchisees, unit-level results and total debt across units carry more weight. A brand's track record helps but does not replace your own application.
Prepare the franchise agreement, the disclosure document, your personal financial statement, a unit budget based on Item 7 and local quotes, and resumes. Existing operators should add unit-level P&Ls. See our franchise quick-service page for the full franchise lifecycle and what funders look for when a restaurant applies.
Should you finance the fee or pay it with cash?
If you have the cash and still keep a healthy reserve, paying the fee directly often simplifies approval and lowers borrowing. If paying it would drain the reserve you need for opening and the first months, including it in a larger package can be the safer choice, even at some cost. The worst outcome is a signed agreement with no money left to open.
Before deciding, list every cash need from signing to steady sales: fee, deposits, pre-opening payroll, opening inventory and a reserve. Our guides to opening costs and pre-opening expenses apply to franchise units too.
Frequently asked questions
Is the franchise fee refundable?
It depends on the brand and the agreement. Many franchise fees are non-refundable once paid, or refundable only in specific circumstances. Item 5 of the disclosure document usually describes refund terms. Read it closely and ask a franchise attorney before paying.
Can I use a business credit card to pay a franchise fee?
Some franchisors accept cards and some do not, and card balances carried over time are often expensive. If you use a card, plan to clear it quickly or move the cost into longer-term funding. Confirm with the franchisor and consider the effect on your credit utilization before applying for other funding.
Do multi-unit development agreements have separate fees?
Often, yes. Development agreements may require development fees paid upfront for future units, sometimes credited toward each unit's franchise fee. Terms vary by brand. Plan capital for the full schedule before signing, because missing development dates can cost territory rights.
Is Restaurant Capital Now affiliated with any franchise brand?
No. Restaurant Capital Now is independent and is not affiliated with, endorsed by or sponsored by any franchisor. We help franchisees get funded through our funding partners. Always confirm fees and requirements with the franchisor directly.
Can the franchise fee be included in an SBA-backed loan?
Franchise fees can be an eligible use in some SBA programs, subject to current SBA rules, brand eligibility and the lender's review. Confirm current details with the SBA or a participating lender before planning around it.
Plan the whole unit, not just the fee
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Updated September 14, 2026 · Restaurant Capital Now Funding Team