Establishment cost

What it means

Establishment cost captures the one-off spend of building the business to the point it can open its doors. Typical components are the initial franchise fee, premises fit-out, equipment and plant, signage, professional and legal fees, and opening stock.

It is a subset of the total investment. Establishment cost covers getting open; total investment also adds the working capital you need to trade through the early, often loss-making, months before the outlet is self-sustaining.

The Franchising Code of Conduct 2025 requires the disclosure document to set out the establishment costs a franchisee can expect, so prospective franchisees can gauge the capital required before committing.

In practice

Treat disclosed establishment costs as estimates and build a contingency. Fit-out and construction in particular can run over, and site-specific factors such as landlord requirements or council conditions can add cost.

Separate establishment cost from working capital when you plan your funding. Underestimating either is a common cause of early cash-flow stress, but conflating them hides how much cash you need after opening.

A real example

Opening a food outlet involves a $40,000 initial franchise fee, $220,000 fit-out, $60,000 in equipment, $15,000 signage and $20,000 opening stock, an establishment cost of about $355,000. The franchisee then needs a further $50,000 in working capital to cover wages, rent and supplies until the outlet turns cash-flow positive.

Establishment cost, FAQs