Franchise Costs You Need To Know

Guide To Franchise Costs And Things To Consider

Franchise CostsMost entrepreneurs are aware of the franchise costs associated with owning a franchise business. Items like inventory, insurance, expansion all come with a cost that is sometimes overlooked prior to making the initial investment cost.

For emerging business owners, owning a franchise is an attractive investment. The franchisor provides all of the training and branding necessary to launch a potentially successful business.

Franchise Costs And Monthly Expenses

What many entrepreneurs focus on is the initial investment, without looking at any of the additional fees and franchise costs necessary to become part of the corporation.

Inventory and Equipment

Many franchises involve selling products to customers, and that means investing in inventory and equipment. Most franchise owners advise that people budget for an additional $20K (at the very least) to be spent on inventory and equipment. The upside is that franchisors already have established vendors that they deal with, so the professional relationship is already there.

Insurance

Whether you are opening a restaurant franchise, a fitness center, or a pet grooming business – any operation that has a physical location needs to budget for the added cost of insurance. The more involved the franchise operation is with equipment and supplies, the occupancy capacity, the potential volume of customers, and the type of activity that occurs at the location, the higher the franchise cost for insurance.

Build-Out Costs

Franchises with physical locations also have to calculate for building out. Unfortunately, every franchise location is unique, so arriving at an abstract number to figure into a budget is practically impossible. The franchise cost of building out includes everything from paint and furniture, to signs, line feeds for plumbing and electrical, lighting fixtures, and everything else in between. The build-out franchise cost is probably the the biggest part of every budget.

Software Licensing

Many franchise companies requires software for accounting, inventory, correspondence, point of sale, and other aspects of operations. To run this software, there is a franchise cost for licensing for general office applications. In addition to any proprietary software that the franchisor requires of its branch owners.

Financing

One of the other major franchise costs is securing working capital. Most franchises do not get steady customers and revenues until three to seven years out from opening day. This boils down to securing loans to keep the business running until revenue gets to the point of not needing financial assistance. The good news is that most franchisors can help in securing loans, and how to budget to the extra franchise costs. The down side is having to pay down loans the first few years before you can truly own the franchise and think about growing.

Rent

Unless you own the parcel of land on which the franchise is going to exist, you will need to figure rent into the franchise costs. The franchisor usually is willing to work with you and commercial property management to secure a location, but those locations have to be zoned for that type of franchise, and there may be additional costs that include operation licensing and permits.

Keep Franchise Costs Low

If you like the idea of the training and tools that a franchise operation provides, but want to avoid the added franchise costs that are built into the operation, consider the world of commercial financing. Commercial financing operations can be run out of the home office, with very little overhead, and potentially huge revenues.

The Commercial Capital Training Group (CCTG) offers the skills and support system for emerging entrepreneurs to structure financial agreements between lenders and business owners, and take away thousands of dollars (plus recurring revenue streams) after the deal is made.

CCTG does not have all of the overhead and built-in franchise costs, which gives commercial finance professionals the freedom and independence to brand themselves and make their own profits, while operating out of the house on their own schedules.

If you want to take control of your own financial success, and receive training without having to spend money on marketing, insurance, inventory, or equipment, then consider The Commercial Capital Training Group your low-cost alternative to what franchise companies are offering.

Further Reading