Franchising Doesn't Have to be Expensive

You've seen them. There are big golden arches out in front of your local shopping center. You've seen big hotels being built all around town. These are the things that most people think of when they think of franchising, so they naturally think franchising must be really expensive to get into. It doesn't have to be.?

Finding a Great Fit Within Your Budget

What's really nice about franchising is you can find a business that can be a great fit for you with a budget that's also a great fit for you. There's no automatic correlation between what a franchise business costs and the profits that it can earn. It all goes back to your activity in running that business and how you plan to grow that business.?

Every franchisor has to tell you what their cost of entry is and spell out the total initial investment.? They have to disclose it to you in the Franchise Disclosure Document in Items 5, 6 and 7.? Items 5 tells you the franchise fee and all fees paid to the franchisor prior to opening. Item 6 tells you about the royalties you will pay and other ongoing fees you may be paying to the franchisor and its affiliates. Item 7 spells out everything it takes to get into the business up and running by cost category and ranges of investment per category.?

Total Initial Investment

I'll give you a retail franchise business example.? When looking at the total investment, that would include your franchise fee, the lease of your space, the build out of that space, fixtures and equipment, inventory, working capital, and everything that starts to move that business to cash flow break- even.?

The franchisor wants you to know these things upfront. Many of them have minimum liquidity requirements and net worth requirements as guidelines to know getting into their business is going to be affordable for you and that you are capable of funding their opportunity. You also want to make sure it's affordable for you and that you feel comfortable with it.