Every business requires start-up costs in its inception. One of the most significant franchise advantages is that a large portion of these are covered by the parent company (Franchisor). Opening a franchise means buying a proven concept as opposed to starting a business from scratch. The operating details and marketing plans have already been developed and tested and ongoing support is provided to help set the business up for success.
Although entering the franchising industry may seem expensive at first when looking at initial fees and ongoing expenditures, beginning a business from nothing can actually be far pricier and riskier. When you buy a franchise business, one of the best benefits is full knowledge of every cost before jumping in. Franchisors and franchise consultants can offer a very accurate picture of everything from the start-up capital required to estimated revenue streams.
When considering how to start a franchise, remember that there can be a really wide range of expenses depending on the brand. A franchise business can cost anywhere from $10,000 to $3,000,000 at the most extreme ends with the majority falling somewhere between $100,000 and $300,000. Full-service and fast food restaurants tend to be on the highest end of the scale while enterprises that offer home or mobile office options tend to fall on the lowest side.
Some of the most important costs to be aware of when you franchise your own business include location, inventory, equipment, insurance, maintenance, licenses, and signage to name a few. Before you decide to start a franchise, always carefully read over the FDD (Financial Disclosure Document). Every franchise company is required to provide one and it outlines in detail the price of each aspect of franchising including payment methods and due dates.
Also consider the franchise fee, a one-time entry price to use the franchisor’s brand, operating system, and ongoing support in management and marketing. They typically run around $20,000 to $30,000 depending on how established the brand is already. A few other fees to be aware of are ongoing royalties, which typically range from 4% to 8% of gross revenues, and marketing funds which often cost between 2% to 4% every month.
Applying for funding is always an option when first deciding how to franchise as cheaply as possible. Options for acquiring capital if you don’t have it personally include a commercial loan, consulting the Small Business Association, or financing through the franchisor to cover initial investments such as the franchise fee or other start-up expenses. A good credit score will be important during this part of the process.
When weighing all the options for buying a franchise business with minimal expense, be sure to research brands that offer incentives for anyone who is just starting out. Often limited deals or discounts are available depending on your circumstances including lower initial fees and reduced monthly payments. The best franchise consulting company can be crucial in navigating this phase of deciding which way to go when franchising.
When you franchise your business it will not be without risk. However, the upsides provide entrepreneurs with a much more compelling opportunity since there are many avenues for doing so with minimal costs. If learning how to become a franchisor, don’t be afraid to seek professional counsel!
The expertise of a franchise consulting company can be invaluable in building a business and saving money throughout the process. Let an expert franchise consultant at FMS Franchise help you in starting your own franchise with minimal expense.
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