| How much does a franchise cost? Of course the | | | | signs, and landscaping. You may also incur |
| cost of obtaining and starting a franchise | | | | grand opening and initial promotional expense |
| depends on several variables. For instance, | | | | to get the business going. |
| the type of industry, size and location are | | | | |
| some of the differentiating factors. | | | | Keep in mind that many times a higher initial |
| However, there are some basics that you could | | | | investment does not necessarily mean a higher |
| keep in mind if you are contemplating | | | | return. Often times franchises can be started |
| becoming a franchisee. | | | | with a total initial investment of less than |
| | | | $200,000 and sometimes even less than |
| First of all, you will usually have to pay a | | | | $50,000. Some home-based business such as |
| franchise fee, which averages somewhere | | | | handyman franchises and marketing franchises |
| between $20,000 and $30,000. However, the | | | | provide a decent return with little upfront |
| fee could be less than $10,000 for businesses | | | | cash. |
| such as mobile and home-based businesses, or | | | | |
| in some cases could possibly cost $100,000 or | | | | Ongoing, you will need to be prepared to |
| more. A few examples of these more expensive | | | | continuously pay royalties to your |
| franchises include building maintenance | | | | franchisor, possibly 4 to 6 percent of your |
| businesses and some types of athletic | | | | revenue. Also, insurance (liability and |
| training facilities. | | | | health), inventory, and equipment maintenance |
| | | | would be continuous expenses. Of course, |
| Since you are gaining the advantage of taking | | | | there will be employee salary and benefits. |
| part in an already recognizable business | | | | Additionally, you may be required to pay into |
| name, and usually ongoing support from the | | | | a national advertising fund. |
| franchisor as well, franchisors typically | | | | |
| stipulate that a potential franchisee meet | | | | Before making a decision on a franchise, it |
| other financial requirements. A | | | | is important to obtain from the franchisor a |
| predetermined amount of readily available | | | | copy of the Uniform Franchise Offering |
| funds that are not borrowed is usually a | | | | Circular (UFOC), also known as the disclosure |
| necessity as well as a certain net worth. In | | | | document. The upfront fees are outlined in |
| order to pay for ongoing expenses that are | | | | this circular. The document should describe |
| not covered by revenue you will also need a | | | | the initial fee which may be non-refundable |
| guaranteed amount of working capital. | | | | as well as the other startup costs. If there |
| Depending on the type of business, it is | | | | are any items that you believe might be a |
| important that the working capital cover a | | | | startup costs that are not mentioned in the |
| particular length of time, ranging from a few | | | | disclosure, be sure to ask about them. |
| months to possibly two to three years until | | | | |
| the business is in full swing. The franchisor | | | | All in all, you want to be sure your |
| typically provides an estimate of the amount | | | | financial situation will cover expenses for |
| needed. | | | | you and your family during the time it takes |
| | | | to get the business up and running. This may |
| Besides the franchise fee, other upfront | | | | take several months or a bit longer than |
| costs could include professional fees such as | | | | that. Keep mind your operating expenses as |
| legal and accounting services, insurance, and | | | | well as personal expenses for the first year |
| operating licenses. Employee training, | | | | or two in business. In order to have the best |
| inventory, and equipment are usually part of | | | | chance of success with a franchise, it is |
| the startup as well. Also plan on, rent and | | | | recommendeded you contact a franchise |
| possible leasehold improvements, and other | | | | consultant to discuss your goals and |
| costs involved in setting up a retail | | | | finances. |
| location including the purchase of fixtures, | | | | |