The Business of Franchising: Turn One Location Into Many
$43K Franchise Fee · 5–6% Royalties
In this episode, I sit down with Dr. Tom DuFore, a franchise consultant with over 20 years of experience who has helped hundreds of entrepreneurs turn their businesses into scalable franchise systems. We break down exactly how it works — the costs, the contracts, the royalties, and the real path to passive income.
“Franchising is really that idea of taking a business that you’ve already created and essentially creating a coaching business.”— DR. TOM DUFORE, Franchise Consultant
What You’ll Learn in This Episode
- Whether your business is actually ready to franchise (the 3 checkbox test)
- How franchise royalties work and who checks the books
- What a master franchise agreement is — and how it unlocks international growth
- The average franchise fee and what franchisors spend to get set up
- How to exit a franchise — buyouts, selling, and the 10-year contract cycle
- The biggest mistakes franchisors and franchisees both make
- A real success story: 1 threading salon → 100+ franchise locations
How Much Can a Franchisor Earn?
Average franchise fee (per new franchisee) $43,000+
Typical ongoing royalty (% of gross sales) 5–6%
Setup cost to franchise your business ~$50,000 + legal fees
Standard contract term 10 years (+ two 5-year renewals)
Early exit penalty for franchisee Up to 2 years of royalties
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FAQ
Is franchising really passive income?
Partly. Once franchisees are operating, royalties flow to you automatically. But you’re still responsible for training, coaching, and protecting your brand — it’s more like running a coaching business than a true hands-off investment.
What does a franchise consultant do?
A franchise consultant like Dr. Tom DuFore works with founders to set up the entire franchise system — strategy, documents, manuals, brand standards — so they can legally and effectively sell franchises to buyers.
How do you know if your business is franchisable?
Tom uses three checkboxes: (1) Do you have a profitable prototype? (2) Can you teach someone to run it in a few weeks to a few months? (3) Would customers exist for it in other markets nationally or internationally?
How much does it cost to become a franchisee?
The upfront franchise fee averages just over $43,000, plus the startup costs of launching the actual location. On top of that, a 5–6% monthly royalty on gross sales goes back to the franchisor.
Can you franchise internationally?
Yes — and it can actually be simpler than opening company-owned locations abroad. Through a master franchise agreement, a local buyer in that country takes on the responsibility of selling and supporting franchises in their region, while sending a portion of royalties back to you.
What type of business is best to franchise?
Almost any proven, teachable business can be franchised. Franchising is simply a method of distribution — the real question is whether your model is profitable, replicable, and has demand beyond your current market.