Most people compare franchises by the franchise fee, and that is the wrong number to start with. The fee is one line. When you put a home-based franchise next to a storefront concept, the real difference shows up in the lines below it: the lease, the build-out, the equipment, the staff you hire before you open, and the bills that arrive every month after that.
I run a home-based franchise system, so you know which side of this comparison I sit on. I’ll still be fair to both sides, because a storefront is the right business for some people, and a home-based model costs you things that never appear in a table.
Here is what I’ll walk you through: where the costs sit in any franchise disclosure document (FDD), what a storefront adds, what a home-based model leaves out, what it asks of you instead, and how to compare two FDDs fairly.
Where the Real Cost of a Franchise Shows Up in the FDD
The real cost of a franchise sits in three items of the FDD, not in the brochure. The Federal Trade Commission’s A Consumer’s Guide to Buying a Franchise (the edition on the FTC’s site is dated September 2020) covers Items 5, 6 and 7 together as the initial and ongoing costs. Item 5 is the initial fees. Item 6 is the other fees you pay while you operate. Item 7 is the estimated initial investment.
Item 7 is where a storefront and a home-based business stop looking alike. The FTC’s guide says these items describe costs such as initial inventory, signs, equipment, and leases or rentals, along with real estate, leasehold improvements and employee salaries. Every FDD uses the same item numbers, so you can lay two of them next to each other and see which rows one concept has that the other doesn’t.
What a Storefront Franchise Costs Before Opening Day
A storefront asks you to spend most of the money before you have a single customer. The FTC’s guide says you may face significant costs to rent, build and equip an outlet and to buy initial inventory. That is a description of what a location needs, not a criticism. These are the rows I would expect to find in the Item 7 table of a retail or food concept:
- Real estate: a lease deposit and the first months of rent.
- Build-out and leasehold improvements.
- Equipment, furniture and fixtures.
- Signage, inside and outside.
- Opening inventory.
- Staff hired and trained before the doors open.
- Working capital, often labeled “additional funds,” to carry the business through its first months.
Each row is a range, and the footnotes explain the range. Read the low end and the high end, then ask current franchisees which end their own opening landed near.
Timing matters as much as the total. Depending on what you negotiate, the lease can start before the revenue does, while contractors are still working. The FTC’s guide advises estimating your operating expenses for the first year and your personal living expenses for up to two years. That advice applies to a home-based franchise too.
What Commercial Rent Adds Every Month After You Open
Rent is the cost that stays after opening day, and it is easy to underestimate. Cushman & Wakefield’s U.S. Retail MarketBeat for the second quarter of 2026 reported national retail asking rents of $25.65 per square foot, up 2.2% from a year earlier. That is a national average of asking rents in the markets the firm tracks. Your town could sit far below it or far above it.
Some hypothetical arithmetic makes that number easier to picture. Commercial rent in the U.S. is normally quoted per square foot per year. Let’s say you lease a 1,500-square-foot space at exactly that average. That works out to $38,475 a year, or about $3,200 a month in base rent. This is an illustration, not a quote for any real space, and depending on the lease it may leave out your share of the property’s taxes, insurance and maintenance.
Rent is only the first of the fixed costs. A location has utilities, and somebody has to be there for every open hour, which usually means payroll. Those bills arrive whether the month was busy or slow. What does the business need to bring in each month before they are covered? Take that question to the FDD and your accountant, not to a national average.
The rent also buys something, and it’s fair to say so. A good location puts you in front of people who are already walking or driving past. For a restaurant, a salon or a retail shop, the space is part of the product.
What a Home-Based Franchise Takes Out of the Cost Table
A home-based franchise removes rows from the table instead of shrinking them. With no commercial lease there is no lease deposit, no build-out and no sign over a door. Many home-based service businesses carry little or no inventory, and an owner who starts alone has no staff to hire before opening.
The monthly picture changes in the same way. A home-based service model largely avoids rent on a commercial space, the utilities that go with it, and the payroll for a front counter. That does not make the business safer or easier. It changes what you are responsible for.
A shorter table is not an empty one. Expect to still see rows such as the franchise fee, training, insurance, licenses, a computer and software, professional fees and working capital. Your living expenses also stay the same size when your office is a spare room.
What a Home-Based Model Costs You in Other Ways
A home-based model moves part of the cost from your bank account to your calendar. Nobody walks past your spare room. Every customer you get, you get because you went out and found them.
That means you have to sell. You make calls, ask for meetings, follow up, and hear no more often than you hear yes. If that sounds like a bad week to you, a smaller investment won’t fix it.
Self-discipline is the second cost. A store has opening hours, and the hours create structure. At home, nobody notices if you start at ten or stop at two. Can you plan your own week and hold yourself to it when no one is checking? Focus determines direction, and at home you are the only one supplying it.
The third cost is that you are the business. In the early days there may be no manager to cover for you and no team to carry a slow week. Some people do their best work that way. Others do better with a location, a crew around them and customers who come to the door.
How to Compare Two FDDs Fairly
You compare two franchises fairly by reading the same items in both documents. Put the two documents side by side and go through them in this order:
- Item 5: the initial fees, and whether any part is refundable.
- Item 6: the ongoing fees, what each one is based on and when it is due.
- Item 7: the estimated initial investment, row by row, low end and high end, with every footnote.
Then add what neither table includes, which is your household’s living costs while the business gets going.
Ask the people who have lived the numbers. Item 20 lists current franchisees and those who recently left, and the FTC’s guide says talking to them may be the most reliable way to verify the franchisor’s claims. Ask how their real costs compared with Item 7. Ask the home-based owner how they find customers and how many hours that takes.
Pay for independent advice. The FTC recommends a lawyer experienced in franchise matters and an accountant. Hire a franchise attorney who works only for you, not for the franchisor and not for anyone who is paid when you sign.
Keep cost and performance as two separate questions. Item 7 tells you what it takes to open. Any question about financial performance belongs in Item 19 of the FDD, and according to the FTC, a franchisor may not make a sales or earnings claim that doesn’t appear there. A lower investment is not a prediction of anything.
Where RedKnight Fits in This Comparison
RedKnight is a home-based franchise, so everything I said about selling applies to us. Our model fits in four words: You Sell, We Build. You sell marketing services to local businesses, build the client relationships and run your own business. That includes your own hiring, billing, invoicing, HR and operations. You are an independent business owner.
Our side is the delivery. RedKnight carries out the marketing work for your clients: SEO, web design, Google Ads, social media and content. We also provide the brand, the systems, the training, the playbook, the technology and ongoing coaching.
Here is what that means for the cost table. The model is home-based, and no commercial lease is required. Most franchisees start as solo operators. The franchise fee is $9,900, and that is one row. The full picture of fees and estimated investment is in Items 5, 6 and 7 of our FDD. Read every line there.
Here is what it does not mean. Nobody walks into your home office asking for a website. Your results depend on your market, your effort and how well you execute, and nobody can promise them. If you ask me what a franchisee earns, I’ll point you to Item 19 of our FDD and to the franchisees listed in Item 20. If low overhead is high on your list, our article on low-overhead franchise opportunities covers that ground.
The Lower-Cost Franchise Is Not Automatically the Right One
The cost difference between these two models is real, and it still shouldn’t make the decision for you. A smaller investment means less money committed up front. It does not make the business easier, and it does not make success more likely.
So turn the comparison around and start with yourself. Ask:
- Do I want customers to come to me, or am I willing to go and find them?
- How much can my household commit, and how long can we carry our living costs?
- Which hard day would I rather have: a slow day in a space I’m paying for, or a day of calls with no yes?
Different answers lead to different franchises. Someone who loves running a floor and serving walk-in customers may be miserable prospecting from a home office. A salesperson who likes building relationships may feel boxed in behind a counter. If you are still deciding whether a franchise is the right vehicle at all, our article on opening a franchise vs starting your own business is a good next read.
Whatever you choose, choose it with the documents open. The work is real. So is the freedom. Both come from what you do after you sign, not from the size of the check you wrote.
Ready to Compare the Numbers Yourself?
If a home-based model sounds like your kind of work, put ours through the same test. Look at the RedKnight franchises available, ask for our FDD, and read Items 5, 6 and 7 next to any other concept you are considering. Then take it to your own franchise attorney and call the franchisees listed in Item 20 before you decide anything.