More Than Just the Setup—Why Smart Investors Should Look Beyond the Surface
Franchising is often celebrated as one of the most reliable ways to enter the ever-growing food and beverage (F&B) industry. The appeal is clear: you step into a business backed by an established brand, a proven model, and operational support designed to minimize the risks that come with starting from scratch.
But what many first-time investors overlook is that the initial setup cost is only part of the story. Beyond the visible investment lies a series of ongoing and often underestimated expenses that directly impact profitability. Recognizing and planning for these hidden costs can be the difference between long-term success and constant financial strain.
To paint a clearer picture, here’s a deep dive into the real costs behind launching and running a franchise.
The Franchise Fee: Securing the Brand Advantage
Every franchise journey begins with the franchise fee—a one-time payment for the right to operate under a recognized brand. This fee typically falls between ₹10 lakh and ₹20 lakh, depending on the brand’s market presence, outlet format (whether it’s QSR, café, or fine dining), and location.
This fee grants access to far more than just a name. It covers:
- Operational frameworks
- Standardized recipes and sourcing partnerships
- Staff training protocols
- Marketing support
In short, it fast-tracks your entry into a market with an existing customer base, allowing you to bypass the costly trial-and-error period that independent ventures face.
Marketing Costs: Driving Local Visibility
A strong brand name might get customers through the door once—but it’s local marketing that keeps them coming back. Many investors are surprised to learn that national-level branding doesn’t replace the need for targeted, ongoing marketing at the outlet level.
Typically, a franchise requires a contribution of 2–5% of monthly revenue towards a central marketing fund. For an outlet generating ₹15 lakh per month, this amounts to ₹30,000–₹75,000 monthly.
Alongside this, additional local marketing is essential to capture attention in a crowded market:
- Swiggy/Zomato promotions: ₹20,000–₹50,000 per month
- Social media ads and influencer tie-ups: ₹50,000–₹1 lakh annually
These costs are critical for boosting footfall, increasing repeat business, and building community engagement around your outlet.
Taxes: Protecting Margins with Smart Planning
Taxation is another area where hidden costs quietly chip away at profits.
For most F&B outlets, the common tax structure includes 5% GST on sales without Input Tax Credit, meaning setup costs like raw materials, rent, and interiors don’t benefit from tax refunds.
Additionally, franchise fees and royalties attract 18% GST. So, if your franchise fee is ₹20 lakh, expect an additional ₹3.6 lakh in GST, bringing your total payment to ₹23.6 lakh.
Ignoring these obligations during financial planning can leave businesses scrambling to cover shortfalls, so accounting for them early is vital.
Licenses and Compliance: The Price of Legitimacy
Legal compliance is non-negotiable in the F&B industry, and securing the right licenses upfront prevents disruptions and penalties down the line.
Here’s what most outlets require:
- FSSAI License: ₹15,000–₹25,000
- GST Registration: ₹5,000–₹10,000
- Fire Safety License: ₹30,000–₹50,000
- Shop & Establishment License: ₹10,000–₹20,000
- Municipality and Health Permits: ₹30,000–₹60,000
These licenses safeguard operations and build consumer trust. Skimping on compliance is never worth the risk.
Real Estate Costs: The High Price of Footfall
Ask any franchise owner, and they’ll tell you location is everything. But securing prime real estate comes with hefty upfront costs beyond monthly rent.
For a location with ₹1.5 lakh monthly rent, landlords commonly expect:
- Security deposit: ₹4.5- 9 lakh (3-6 months of rent)
- Advance rent: ₹1.5- 3 lakh (1-2 months upfront)
That’s nearly ₹10-12 lakh committed before even opening your doors. Still, these locations often justify the investment with higher traffic, better visibility, and stronger long-term returns.
Technology and Delivery Costs: Running a Modern Operation
With online orders contributing 30–50% of total sales in many concepts today, efficient technology is no longer optional.
Regular tech costs to factor in include:
- Aggregator commissions: 15–30% per order on platforms like Swiggy and Zomato
- POS and CRM systems: ₹5,000–₹15,000 per month
A smooth tech stack keeps operations efficient, enhances customer experience, and reduces errors—all crucial to sustaining repeat business in a digital-first market.
Long-Term Success Starts with Full Financial Clarity
Franchising continues to be one of the most rewarding ways to enter the F&B industry, but only for those who prepare with eyes wide open. These hidden costs may seem secondary at first glance, but they play a defining role in operational stability, customer retention, and profit margins.
A successful franchise isn’t just about the setup—it’s about the strategy behind sustaining it. When you budget thoughtfully and plan comprehensively, the path to scale becomes clearer, smoother, and far more profitable.
