Focus on the Long Game: Weighing the Costs of Opening a Franchise
Have you been thinking about jumping into the franchise game? There are many benefits to franchise ownership, including training and support from a big business network. You also get to exercise your entrepreneurial muscles and own a business without first coming up with a unique and innovative product idea. However, before you dive into franchise investment, you should understand that it may take a while before you reap the financial benefits. Here is what you should know about the costs associated with opening a franchise, and why you will need to stay in the game for the long term if you want to reap the financial rewards of your labor.
When buying a franchise, you should expect to pay certain fees and payments that are unique to franchise ownership. The franchise fee (also known as the initial fee) is a one-time payment you will make up-front to the franchise when you become a franchisee. This amount differs between franchises, but it is never less than $500 and can be as much as $50,000. It will take some time to get this money back, so make sure you are planning to operate your franchise long enough to recoup your initial investment.
Now that you are a franchisee, you will need to make sure you have the equipment required to operate effectively. Depending on the business you are in, you may need a lot of equipment or very little. Make sure you budget carefully for the supplies and equipment you will need to get started.
Building and Construction
One of the most expensive costs associated with franchise investment is construction. This broad category can include all of the following:
- Construction and zoning fees
- Real estate agent fees and commissions
- Construction costs
- Interior design
- Professional signage
Your franchise fee may cover some of the costs associated with construction, but it may not cover all of them. Before you begin, make sure you have a solid understanding of how much you are expected to pay as the franchisee.
When considering your bottom line as a franchisee, it is important to keep royalties in mind. Royalties are usually paid on a monthly basis to the franchisor. Most royalties fall somewhere between 5% and 9% of gross sales and are one of the main sources of income for the franchisor.
Prepare for Success
Now that you know what to expect when buying a franchise, you can plan accordingly. The more prepared you are to meet initial costs, the better off you will be when operating your own franchise. Franchises can have many startup costs, but they can also provide long-term profits. As long as you run your location wisely and understand that you will not experience immediate profit, you have a good chance of success. To learn more about opening your own education franchise, contact Best in Class Education Center or download our franchise brochure.Back