Each franchise opportunity varies in cost. There are financial requirements, fees, and legal costs, build-out costs for your location, professional fees, signage and inventory and contractor fees. The franchisor generally does not contribute to any of these financial obligations or costs.
- The franchise fee is generally between $15,000 and $50,000 and this covers training, support and site selection and the right to use the franchise name.
- Legal fees are determined by the franchise attorney. This attorney helps review the Uniform Franchise Offering Circular and the agreement. You should consider $1,500 to $5,000 as your legal obligation.
- Build out fees or costs are the costs needed to lease a specific location. This fee must include lease hold improvements, furniture, fixtures, signage and equipment. There are also inventory costs to be considered if you are a brick and mortar syndication.
- Inventory costs include specific product offerings. Budget between $10,000 and $150,000 for beginning inventories and depending on the business.
- Supplies are those items necessary to run your franchise. You may need utensils for customers, napkins, dishes and any other necessity for a restaurant franchise. You will also need office supplies and computer, printer and software. Your franchise company should be able to give you accurate estimates on what supplies are needed and the costs.
- Working capital is necessary to have cash on hand to run the everyday workings of your business. Working capital may be required to take care of a certain period of time that ranges from a few months to years of business. It does take time to get a business in full swing. Your franchisor can give you an estimate of the working capital you will need to open the franchise.
You can obtain financing through a bank, government small business loans and often financing through the parent company of a franchise. Do be aware that if you take out loans you will need to consider payments and interest as a part of your cost of doing business.
Do research to find the best locations at the best price. Leasing is a big part of costs. Find the best employees you can find. It has been reported that labor is one of the highest costs of any business and this includes franchises. Cover all costs with your attorney as well as the home company to make sure you cover everything. You do not want a hidden cost to come and surprise you on opening day.
And above all, consider what expenses you have yourself. You want to build in your own salary as well as salaries for helpers. It’s difficult to run a business alone, and if you try, you may burn out fast. So allow time for the appropriate funding in your budget and in your business.
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