The True Costs Associated With Purchasing A Franchise

If you’re considering buying a franchise, there are likely many different costs and fees that you’re not aware of at present. The best thing you can do is make yourself aware of the many fees applicable so you can make an informed decision on whether purchasing a franchise is right for you. Here are the true costs associated with purchasing a franchise:

Capital Investments

Once you’ve bought a franchise, it’ll be up to you to make sure that everything is in keeping with the current branding and image. It may involve making over your premises with things like branded fittings, for example. However, some franchisors will do this for you depending on the arrangement you have. Make sure you find out.

The Franchise Fee

This is the upfront fee you will pay when you purchase the franchise. Depending on the brand, this can vary wildly. This is usually considered to be a ‘package fee’ and will cover things like:

• • Training

• • The rights to use the brand name and other branded materials

• • Special equipment
  • Analysing the area

Working Capital

Now you need to consider how you will keep enough money in your franchise to keep it going until you make the money back. You won’t start making money right away, and you’ll likely be out of pocket. You need funds to pay suppliers, as well as expenses for day to day operations of the franchise. If you open a catering services franchise, you will need to hire staff and advertise, for example. Speaking with the franchisor can help you to work out how much capital you need in the beginning. It might take you less time to generate revenue than if you were to start a brand new business, so look at that as a bonus.

Ongoing Fees

There are going to be ongoing fees associated with purchasing a franchise too. Advertising fees are important, so you’ll need to budget for a franchise marketing agency to help you. You will also need to be prepared to pay the franchisor an ongoing fee each month for permission to run the franchise. You won’t always have to do this but it applies in some cases.

It may seem great if you find a franchise with no ongoing fee, but you’ll want to find out why this is before you get excited. What will the source of income be for the franchisor going forward?

Every Franchise Is Different

These are the true costs you’ll need to be prepared to fork out before you purchase a franchise. Every single franchise is different; for example, a franchise may cost you $500 initially, or a much as $300,000. Usually, a hotel and catering franchise will be over $100,000 on average, while a personal services franchise will be around $42,000 on average.

Other Potential Franchise Costs

There are other potential costs to consider. Things like:

• • Franchise renewal

• • Franchise resale

• • Professional services
  • Insurance

may be applicable, so make sure you’re aware!

Now you’re better informed in your decision to purchase a franchise. Are you going to go ahead? Leave your thoughts below!