Category: Franchise

Article contributed by Don Daszkowski

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 recommended you contact a franchise consultant to discuss your goals and finances.

About the Author
BusinessMart.com has become the fastest growing business for sale search engine, helping buyers and sellers of small businesses and franchises. BusinessMart.com has many resources to help you on your journey to start your own business, sell your existing business or open a franchise. BusinessMart.com has thousands of businesses for sale in the US and Canada.

Article contributed by Don Daszkowski

When considering life as an entrepreneur, it is important to understand the definitions of a franchise, business opportunity and a start-up business. There are, of course, advantages and disadvantages to each style of business. In this article we will discuss the advantages and disadvantages of owning a franchise.
FRANCHISE:
A franchise is a right granted to an individual or group to market a company’s goods or services within a certain territory or location. The franchisor (the company owner) sells the rights to the franchisee and then typically receives a fee for ongoing support, therefore having a vested interest in the success of each franchise.
Franchising began back in the 1850’s when Isaac Singer invented the sewing machine. In order to distribute his machines outside of his geographical area, and also provide training to customers on the use of the machines, Singer began selling licenses to entrepreneurs in different parts of the country. Today many such franchise opportunities are advertised via the Web and other media. Examples of franchises include Carvel, Tutoring Club and Liberty Tax Service.
Advantages:
* There is a higher likelihood of success since a proven business formula is in place. The products, services, and business operations have already been established.
* Bankers usually look at successful franchise chains as having a lower risk of repayment default and are more likely to loan money based on that premise.
* The corporate image and brand awareness is already recognized. Consumers are generally more comfortable purchasing items they are familiar with and working with companies they know and trust.
* Franchise companies usually provide extensive training and support to their franchisees in effort to help them succeed.
* Many times products and services are advertised at a local and national level by the main franchise companies. This practice helps boost sales for all franchisees, but individual franchisees don’t absorb the cost.
Disadvantages:
* Franchises can be costly to implement. Also, many franchises charge ongoing royalties cutting into the profits of franchisees.
* Franchisors usually require franchisees to follow their operations manual to a tee in order to ensure consistency. This limits any creativity on the part of the franchisee.
* Franchisees must be very good at following directions in order to maintain the image and level of service already established. If the franchisee is not capable of running a quality business or does not have proper funding, this could curtail success.
Sometimes franchisors may be lax on their commitment to support the franchisee. Also, they may make poor decisions that would have an ill effect on the franchisee. Therefore, it is important to research any franchise concept thoroughly before signing any agreements.
It is suggested you contact a franchise consultant to discuss if franchising is right for you. You can visit FranchiseBuyersNetwork.com and click on the Franchise Consulting link to have a local franchise consultant contact you for a phone interview.

About the Author
Don Daszkowski is President and CEO of BusinessMart.com. BusinessMart.com has thousands of businesses for sale, franchises and small business articles. Don is also About.com’s Guide to Franchises. About.com is a New York Times Company.

There are many reasons why you should consider expanding your established business as a franchise and you will find 10 great reasons here to do just that!
1. Business Growth
Your business will grow much quicker as a franchise network than an independent sole trader. New outlets will add to your business portfolio and increase your exposure, profitability and sense of business success. The costs you pay at the beginning to transform your business into a franchise will be paid by costs retracted from franchisees investing in the business.
Also costs incurred from setting up independently owned business outlets will be much higher than the costs you will have to pay for franchisee training, PR, launch assistance and so on. The long term benefits of franchising far outweigh the benefits associated with setting up independent business outlets.
2. Franchisee Investors
By the time you recruit a franchisee, they will have been through a rigorous selection process, personal and professional questions, and much more. Thus, you will be certain that when the franchisee takes on to invest in your business, they will share your passion for the business model and your vision for its future growth and profitability.
This is the great thing about franchising your business- knowing that other people share your business dream and will put all their effort into making it a success. They will be more motivated and hard working because they are sharing a business dream that works for them, rather than independent business managers who are salaried by you. Franchisees have a vested interest in the business because simply, there livelihoods depend upon its success.
3. Increase in Business Profitability
As you recruit more and more motivated franchisees and gradually grow your business franchise network, you will be in essence “weeding” out the competitions stronghold in the market your business franchise is located. In other words, as you grow stronger and bigger and draw in existing and new customers with a “new product or service” that’s different from the competition- you will be reducing the competitions impact on its consumer market.
The potential for you to attract more customers through effective marketing and advertising campaigns both on a local and national level will ensure your success against the competition of independently owned businesses.
4. Consumer Service
One thing is certain when you franchise your business and that’s the continual recognition of the one brand your franchise will offer. All of your franchisees will be implementing the same business model functions and will ensure the highest quality of service and product despite where each business is located and this will generate and maintain loyal customers.
Customers will receive the same “quality of service” set down by you as the franchisor in any franchise outlet the customer decides to visit.
5. Local Knowledge
As an independent business owner you may want to expand the business in many different locations. But researching a particular location for your business can be expensive and time consuming.
However, expansion through franchising and potential franchisees eliminates the need for research as the potential franchisee will bring to the table a wealth of information that will be invaluable for the business network expansionist objectives. You can tap into local business knowledge which you may otherwise have been unable to attain.
6. Group Purchasing
As a franchisor of an established franchise network you will be able to take advantage, as well as your franchisees, of centralised buying power from suppliers and manufacturers. An independent business owner would find it more difficult to buy in bulk and budget constraints would hamper their buying power.
As a result of this, your franchisees will be able to offer services or products at a much lower price, once again beating the competition hand down!
7. Dedicated Distribution
As a manufacturer or service provider, establishing the sales function of your business as a franchise operation provides you with a distribution network that is entirely focused on the supply of your product or service to your customers.
8. A problem shared is a problem halved!
If you choose to franchise your business you pass the responsibility of the business management onto your franchisees. This reduces the stress or problems you may incur as a company owner of a chain of independent business outlets where you will have to take care of management of all outlets.
In franchising, the franchisee will act as your manager of its individual unit and will work to the best of his/her abilities since it is a vested interest for them to do well. As a franchisor you can set out in your operations manual a section dedicated to management structures and guidelines and benefit all franchisees involved.
9. Advertising
As your network develops all of your franchisees will benefit from group advertising campaigns initiated by you, at a national and local level. Creating effective communication links between all franchisees- regular coffee lunches (telecommuting if possible), annual meetings and conferences etc- will aid feelings of “community” amongst the franchise network and in turn fuel customer referrals from one franchise operation to the next.
10. Business Success
When you choose to franchise your business the first thing you will notice is an increase in return of your investment. A franchisor’s profits are generated on much lower capital investment, and although the revenue received from the franchised units is less than that from independently owned business outlets, a higher percentage of that revenue is profit.
As you can see franchising can be an effective and highly rewarding way to expand your business. As a prospective franchisor, you must be aware that not all business people are cut out for franchise expansion. It will take hard work, perseverance, time and money to develop the franchise network and you must be prepared for this.
However, with so much guidance and help available from relevant franchise associations and organisations; franchise portals and franchise business, financial and legal consultants, you will be more than able to make the successful transition from business owned to franchise network in no time!
Good luck!

Aine Meade is a Website Editor for Franchise Direct, a leading Internet franchise advertising portal. Aine creates high quality franchise information for its international websites in the U.S., and Europe. Aine has a BA (First) in English and History; MA in Literature & Publishing; Diploma in Media Journalism and a Diploma in Marketing.

We’re proud to let you know that an GetEntrepreneurial.com blog post – Seven Sure Steps to Choosing a Franchise – has been featured on EvanCarmichael.com’s list of the Top 50 Franchising Blog Posts of the year.
The informative article, featuring 7 easy steps to picking a successful franchise, is written by our GetEntrepreneurial.com network expert Kimberly Ellis. Congrats, Kim! It’s a great recognition of the franchising expertise Kim has contributed to the GetEntrepreneurial.com community over the years. If you haven’t, be sure to check out the featured article by Kim: Seven Sure Steps to Choosing a Franchise.
The other articles featured alongside Kim’s article are also equally informative and helpful. If you’re new to franchising, it’s a great idea to check out the other articles and learn how to get started with your franchise and grow your business. It’s a free resource, so why not. You might be on your way to a successful franchise opportunity after making use of the Top 50 Franchising Blog Posts of the year!
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