How Much Does a Franchise Cost
How Much Does a Franchise Cost
First of all, you will usually have to pay a franchise fee, which averages somewhere between $20,000 and $30,000. However, the fee could be less than $10,000 for businesses such as mobile and home-based businesses, or in some cases could possibly cost $100,000 or more. A few examples of these more expensive franchises include building maintenance businesses and some types of athletic training facilities.
Since you are gaining the advantage of taking part in an already recognizable business name, and usually ongoing support from the franchisor as well, franchisors typically stipulate that a potential franchisee meet other financial requirements. A predetermined amount of readily available funds that are not borrowed is usually a necessity as well as a certain net worth. In order to pay for ongoing expenses that are not covered by revenue you will also need a guaranteed amount of working capital. Depending on the type of business, it is important that the working capital cover a particular length of time, ranging from a few months to possibly two to three years until the business is in full swing. The franchisor typically provides an estimate of the amount needed.
Besides the franchise fee, other upfront costs could include professional fees such as legal and accounting services, insurance, and operating licenses. Employee training, inventory, and equipment are usually part of the startup as well. Also plan on, rent and possible leasehold improvements, and other costs involved in setting up a retail location including the purchase of fixtures, signs, and landscaping. You may also incur grand opening and initial promotional expense to get the business going.
Keep in mind that many times a higher initial investment does not necessarily mean a higher return. Often times franchises can be started with a total initial investment of less than $200,000 and sometimes even less than $50,000. Some home-based business such as handyman franchises and marketing franchises provide a decent return with little upfront cash.
Ongoing, you will need to be prepared to continuously pay royalties to your franchisor, possibly 4 to 6 percent of your revenue. Also, insurance (liability and health), inventory, and equipment maintenance would be continuous expenses. Of course, there will be employee salary and benefits. Additionally, you may be required to pay into a national advertising fund.
Before making a decision on a franchise, it is important to obtain from the franchisor a copy of the Uniform Franchise Offering Circular (UFOC), also known as the disclosure document. The upfront fees are outlined in this circular. The document should describe the initial fee which may be non-refundable as well as the other startup costs. If there are any items that you believe might be a startup costs that are not mentioned in the disclosure, be sure to ask about them.
All in all, you want to be sure your financial situation will cover expenses for you and your family during the time it takes to get the business up and running. This may take several months or a bit longer than that. Keep mind your operating expenses as well as personal expenses for the first year or two in business. In order to have the best chance of success with a franchise, it is recommendeded you contact a franchise consultant to discuss your goals and finances.
How Much Does a Franchise Cost - To learn more about this author, visit Don Daszkowski's Website.
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How much does a franchise cost? Of course the cost of obtaining and starting a franchise depends on several variables. For instance, the type of industry, size and location are some of the differentiating factors. However, there are some basics that you could keep in mind if you are contemplating becoming a franchisee.
First of all, you will usually have to pay a franchise fee, which averages somewhere between $20,000 and $30,000. However, the fee could be less than $10,000 for businesses such as mobile and home-based businesses, or in some cases could possibly cost $100,000 or more. A few examples of these more expensive franchises include building maintenance businesses and some types of athletic training facilities.
Since you are gaining the advantage of taking part in an already recognizable business name, and usually ongoing support from the franchisor as well, franchisors typically stipulate that a potential franchisee meet other financial requirements. A predetermined amount of readily available funds that are not borrowed is usually a necessity as well as a certain net worth. In order to pay for ongoing expenses that are not covered by revenue you will also need a guaranteed amount of working capital. Depending on the type of business, it is important that the working capital cover a particular length of time, ranging from a few months to possibly two to three years until the business is in full swing. The franchisor typically provides an estimate of the amount needed.
Besides the franchise fee, other upfront costs could include professional fees such as legal and accounting services, insurance, and operating licenses. Employee training, inventory, and equipment are usually part of the startup as well. Also plan on, rent and possible leasehold improvements, and other costs involved in setting up a retail location including the purchase of fixtures, signs, and landscaping. You may also incur grand opening and initial promotional expense to get the business going.
Keep in mind that many times a higher initial investment does not necessarily mean a higher return. Often times franchises can be started with a total initial investment of less than $200,000 and sometimes even less than $50,000. Some home-based business such as handyman franchises and marketing franchises provide a decent return with little upfront cash.
Ongoing, you will need to be prepared to continuously pay royalties to your franchisor, possibly 4 to 6 percent of your revenue. Also, insurance (liability and health), inventory, and equipment maintenance would be continuous expenses. Of course, there will be employee salary and benefits. Additionally, you may be required to pay into a national advertising fund.
Before making a decision on a franchise, it is important to obtain from the franchisor a copy of the Uniform Franchise Offering Circular (UFOC), also known as the disclosure document. The upfront fees are outlined in this circular. The document should describe the initial fee which may be non-refundable as well as the other startup costs. If there are any items that you believe might be a startup costs that are not mentioned in the disclosure, be sure to ask about them.
All in all, you want to be sure your financial situation will cover expenses for you and your family during the time it takes to get the business up and running. This may take several months or a bit longer than that. Keep mind your operating expenses as well as personal expenses for the first year or two in business. In order to have the best chance of success with a franchise, it is recommendeded you contact a franchise consultant to discuss your goals and finances.
How Much Does a Franchise Cost - To learn more about this author, visit Don Daszkowski's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Joe DagerJoe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean Six Sigma Marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: Business901.com Web/Blog: FundingYourNonprofit.com LinkedIn Profile Follow me on Twitter - Visit Joe Dager's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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