When it comes to auto insurance, there are many reasons to own a franchise. In addition to being an excellent business opportunity, a franchise offers you access to expertise and support that would not be present if you started your own agency from scratch.
Like any investment, there are costs associated with purchasing an auto insurance franchise. Some of these costs could involve initial startup fees, while others can relate to ongoing contributions. Understanding the full picture of what an independent insurance agency franchise will cost is crucial to your success.
What Does the Standard Auto Insurance Franchise Cost?
Curious about the standard auto insurance franchise cost? There are numerous auto insurance franchises out there, and each has its own fee structure. While there is no easy way to generalize what it might cost to start an auto insurance franchise in general, it is helpful to understand the types of costs that go into it.
If you are looking for an insurance agency franchise opportunity, one of the best options is to speak directly with the company. This could provide you with specific details that might not be available online. For example, during a conversation with Freeway Insurance, you could also learn about the support they offer to all franchisees.
Initial Franchise Fees
The vast majority of auto insurance franchise agreements require an initial franchise fee. This is a fee paid directly to the company in exchange for the opportunity to open an auto insurance franchise.
The initial franchise fee can vary greatly between companies. However, according to the Small Business Association, the average startup fee across all industries is at least $20,000.
It is easiest to think of the franchise fee as the cost of doing business under the franchise name. This fee allows you to rely on the name and infrastructure of the franchise instead of building your own operation from the ground up. These payments are typically made in a single lump sum, although some insurance companies offer financing options.
Royalties
The initial franchise fee is only the first part of your obligation as a franchisee. Franchise agreements also require some type of ongoing royalty payments as well. These royalties typically come in the form of a share of monthly sales commissions.
The royalty percentage can vary substantially from one company to another. Each insurance company will set its own rate through the terms in the franchise agreement. The royalty fee typically makes up between 20 and 22 percent of all sales commissions and ancillary revenue each month when working with Freeway Insurance. This varying rate depends on different factors, including what state the franchise is located in. These fees might be lower in areas where insurance companies are eager to grow.
There are also other fees that might be added to the royalty percentages each month. These are directly related to the network-wide services the company provides to franchisees. For example, a company that offers software, hardware, or IT support for each franchise will likely collect a monthly fee for those services along with what they are owed in royalties.
Advertising Fees
It is worth noting that the percentage of revenue that you pay to the franchise is not the only portion of your income that you might be required to share. Most franchise agreements also include additional fees to cover the cost of advertising. This money is typically paid by all franchises into a branded marketing fund.
By collecting these fees, the insurance company can use them to build a central advertising strategy around the national brand. This could involve the use of company-wide marketing strategies, ad campaigns, and marketing materials designed to benefit every franchise.
Every franchise agreement approaches advertising fees in different ways. In fact, not every franchise offers brand-specific advertising at all. For the companies that do, it is not uncommon for the franchise agreement to require that a small percentage of all sales commissions go toward the marketing fund. Freeway Insurance’s Franchise FAQ spells out that its franchisees are required to contribute 2 percent of all sales commissions as well as ancillary revenue to the marketing fund.
Low-Cost Insurance Franchises and Startup Costs
It is important when you are considering a future as an auto insurance franchisee that you take into account more than just the potential fees. The fees that stem directly from the franchise agreement can be substantial, but they also only make up a portion of your expenses.
There are other costs that come with starting a business, and these costs are entirely independent of any fees you might have to pay. The startup costs that come with opening a business are much higher than just the costs associated with the franchise. Some of these expenses include:
- Rent
- Fixtures
- Furniture
- Employee training
- Software
- Décor
- Landscaping
- Payroll
It is crucial that you take into account every expense before you sign up for an auto franchise. You need enough operating capital to not only pay the initial franchise fees but also to operate your franchise in the early days of your new business. It could be in your best interest to seek the guidance of a professional when it comes to budgeting for your new venture.
Ready to Get Started?
Are you looking for a low-cost auto insurance franchise? Auto insurance franchise cost is only one of the factors you should consider. This rewarding business opportunity could provide you with a sound financial future that you control, and beginning the process is easier than you might expect.
To get started, you only need to call us at (877) 822-3024 or contact us via our online form. A member of the Freeway Insurance franchise team will reach out to you in short order and offer you additional details about your options. We look forward to hearing from you and providing you with all of the details about how you could become an integral part of the team.
