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What is the cost of franchise and what types of businesses are franchised

Written by: Timur Sultanov

Article Overview: What does a franchise cost? There is an initial franchise fee, followed by a commission usually calculated as a percentage of sales.

What is the cost of franchise and what types of businesses are franchised

Franchise fee

The amount of the initial franchise fee can be as low as a few hundred pounds or as high as hundreds of thousands of dollars, depending on the type of franchise.

The amount will depend on how well established the franchisor is and what you are getting. If you are joining a group like Body Shop, for example, they will be identifying premises, negotiating leases, fitting out, stocking up, as well as training you to run the operation. The fee is therefore going to be tens of thousands of pounds. A franchise for providing domestic cleaning services, on the other hand, will involve little capital expenditure and therefore should be a lot cheaper at a few thousand dollars.

Ongoing charges

Franchisors normally charge for their ongoing support by way of taking a commission oh sales. The percentage will vary from case to case.

The franchisor will often also levy a charge for out-of-pocket expenses such as advertising. Items such as stationery and uniforms will also have to be paid for, where applicable, usually with a mark-up for the franchisor.

Types of franchises

The best way to find out if there is a franchise that is potentially suitable for you is to get one of the franchise magazines. There is a wide range of franchises available including:

Professional services

-Expenses analysis for businesses (analysing gas, electricity, telephone, etc., for potential savings).

- Dating agencies.

- Employment agencies.

- Travel agencies.

- Business transfer agencies.

Delivery services

- Parcels, pet foods.

Retail

- Shops.

- Supplying shops with greetings cards, batteries, children's rides slot machines.

Cleaning

- Domestic cleaning services, contract cleaning

Repairs

- Windscreens, car body paint chips.

What are the disadvantages of a franchise?

You probably decided on a franchise to overcome lack of knowledge or confidence in the early days.

The main disadvantages are in the longer term:

As time passes, franchisees become fully acquainted with the business and begin to feel that they do not need the franchisor.

The lack of flexibility.

The feeling of being like an employee rather than an owner. If you want to sell the business, there is usually a fee to be paid to the franchisor, who also has to approve your purchaser.

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Related Forum Posts
Re: Best way to start a business? - Hi Rob Welcome to the forum, nice to see you in here. I agree that many people have started franchises without prior business knowledge, but if one listens to what Robert Kiyosaki says in one of his interviews where he is discussing franchise and MLM types of businesses. He says that for anyone joining these types of business their first priority is to learn what the franchise or MLM company can teach them. This will give them a solid start of business knowledge which can then be used in starting their own businesses from scratch. MichelleJ
Re: Which franchise would you buy? - I know this topic is nearly 10 months old, but this is a question you can ask at anytime. It might be interesting to ask, now, once again, what franchise (or in what industry) would you buy at this time? I was recently on a forum and came by the discussion on whether or not a franchise investment in the Advertising industry might be wise at this time? Something along the lines of a sign business, multi-media opportunity, etc. Won't businesses be needing/using these types of franchise businesses more than ever to try and gain customers/clients?
May try with a business broker - I don't want to question you here but are you sure you want to invest every cent of your net worth into 'starting' a business from scratch? Even franchised businesses go bust and in fact the data the franchisors are going to show you are a bit skewed because they aren't going to include those frnachises that went bust with their original owner losing everything and someone in the right place and right time buys out at pennies on the dollar. Trust me when I tell you, your franchisor will even facilitate these buyouts so as the income producing franchise continues and their stats don't take the hit. It's only the original franchisee that loses so much. Now I don't know what type of franchise you are looking at or even what area, but with the kind of liquidity you already have, you might want to get with a business broker and look at profitable businesses for sale. Sure you pay some goodwill but the risk is so much lower, there's usually owner financing on a portion if not all, and you're not having to invest so much cash during the first year or two just to keep the doors open.
Be sure of your investment - I don't want to question you here but are you sure you want to invest every cent of your net worth into 'starting' a business from scratch? Even franchised businesses go bust and in fact the data the franchisors are going to show you are a bit skewed because they aren't going to include those franchises that went bust with their original owner losing everything and someone in the right place and right time buys out at pennies on the dollar. Trust me when I tell you, your franchisor will even facilitate these buyouts so as the income producing franchise continues and their stats don't take the hit. It's only the original franchisee that loses so much. Now I don't know what type of franchise you are looking at or even what area, but with the kind of liquidity you already have, you might want to get with a business broker and look at profitable businesses for sale. Sure you pay some goodwill but the risk is so much lower, there's usually owner financing on a portion if not all, and you're not having to invest so much cash during the first year or two just to keep the doors open. Since you obviously already have some idea of the investment price and projected return, do yourself a favor and browse some of the websites for businesses for sale. Compare all the pros and cons of both avenues.
How to Qualify? - I don't want to question you here but are you sure you want to invest every cent of your net worth into 'starting' a business from scratch? Even franchised businesses go bust and in fact the data the franchisers are going to show you are a bit skewed because they aren't going to include those franchises that went bust with their original owner losing everything and someone in the right place and right time buys out at pennies on the dollar. Trust me when I tell you, your franchiser will even facilitate these buyouts so as the income producing franchise continues and their stats don't take the hit. It's only the original franchisee that loses so much. Now I don't know what type of franchise you are looking at or even what area, but with the kind of liquidity you already have, you might want to get with a business broker and look at profitable businesses for sale. Sure you pay some goodwill but the risk is so much lower, there's usually owner financing on a portion if not all, and you're not having to invest so much cash during the first year or two just to keep the doors open. Since you obviously already have some idea of the investment price and projected return, do yourself a favor and browse some of the websites for businesses for sale. Compare all the pros and cons of both avenues. Just a suggestion.


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