Tuesday, October 28th, 2008
So, you want to own a franchise but are wondering what it would cost you to start one. Read on and get the scoop on the actual cost of owning a franchise. Like all things in life, you have to pay a price for owning a franchise – remember, there are no free lunches.
The price tags for franchises vary depending on the type of business you choose, with mobile and home-based business franchises being the most affordable category:
- hotel franchises: $4 million to $6 million
- full-service restaurants: $700,000 to $3.5 million
- fast food restaurants: $250,000 to $1 million
- auto repair: $200,000 to $300,000
There are different types of costs involved in owning a franchise. While some of these costs are typical expenses that you would expect to pay in any small business, there are other costs unique to franchises. This is the price to be paid for the added value a franchise presumably brings to your business venture.
You will incur both initial and ongoing costs. The initial or upfront costs include:
- Front-end franchise fees: You will have to pay an upfront fee for any franchise that you choose. This fee can range from $5,000 to $50,000 or more. In exchange for this fee, you receive the right to use the franchisor’s name and business concept. In most cases, you also receive a certain amount of training from the franchisor.
- Initial investment: Apart from the franchise fee, you will need to have some amount of money readily available to you to meet your initial setup and working capital expenses. Depending on your business, you may need as little as two to three months worth or as much as two to three years’ requirement of working capital. You can get an estimate from the franchisor as to how much this amount should be.
- Other expenses: You will have to pay professional fees for legal services and operating licenses; and things like insurance, employee training, inventory, rental and equipment will also cost money. Depending on the franchise, you may also have to pay up advertising costs upfront and buy signage packages from the franchisor.
The ongoing expenses include:
- Royalty Fees: In addition to the upfront franchise fee, many franchisors also require an ongoing royalty fee. This fee is assessed on a percentage basis and usually ranges from 5% to 10%. In return for the royalty fee, you are entitled to participation in national marketing campaigns, ongoing training and territory rights.
- Other expenses: Apart from the royalty fee, you will also incur regular ongoing expenses on advertising, equipment maintenance, employee salaries, insurance and inventory.
It is better to be prepared with complete knowledge before you take the plunge. Before you make the decision to buy into a franchise, make sure you have a thorough understanding of all the costs of ownership.
Tags: Business, Directories, Due diligence, franchise, franchise fee, franchising, Opportunities, Small Business
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Monday, October 6th, 2008
Join the fastest growing industry in the United States…Housecleaning! The initial investment to start a Molly Maid Franchise is about $100,000. That sounds like a lot of money, but wait till you see what you get for your investment.
As a Molly Maid owner, you’ll get the satisfaction of being a part of one of the most recognizable cleaning services in America and you will be able to use a wealth of marketing tools set down by the parent company. One of those marketing tools are: Co-op Advertising, ad slicks for newspaper ads and national media.
With its first franchise being sold in 1979, Molly Maid has been helping hundreds of entrepreneurs annually obtain their goals of being a small business owner.
The investment required to start a Molly Maid franchise begins with a $14,900 franchise fee. If you want an exclusive territory, and believe me you do, that will cost you between $35,000 and $40,000 depending on the size or the territory.
You will need supplies so you can do your job and that initial fee is $8,500.
You will also need to show the Molly Maid folks that you have between $35,000 and $50,000 in working capital, bringing your total investment to right around $100,000.
The franchise is a ten-year term and as the owner you will be charged a 6.5 percent royalty fee annually that actually goes down to as low as 3.5 percent as your sales go up. This is a wonderful feature of this franchise because the more money you make the more you get to keep.
In addition, you’ll need to have a net worth of $250,000 or more and liquid capital of $30,000.
Training and Support
So what do you get for your money?
Molly Maid offers an extensive training program that will teach you how to hire the right people for your business. You’ll need about 14 on staff to start. You’ll also learn marketing, legal and financial and even human resources.
In addition, as a Molly Maid franchisee you’ll get a business management software that will help you spend more time at home instead of more time on your computer.
Molly Maid currently has over 300 owners and was recently rated the 81st best franchise award by Franchise 500 magazine.
Of course the primary reason for opening a business is to make money and with a Molly Maid franchise you will make money. Many Molly Maid franchisees obtain their income goal within the first year. More importantly is the time you’ll be able to spend with the one’s you love. You set your own schedule as well as your employee’s schedules.
You will be providing a service to your clients while helping your employees have a fulfilling, secure job. 39 Molly Maid franchise owners have achieved the million-dollar circle award, meaning they have earned at least one million dollars. You too can be a successful business owner without ever pushing a broom or a mop. After the initial investment required to start a Molly Maid franchise is achieved, you’ll be making money and living well.
Tags: advertising, Business, Employment, franchise, franchise fee, franchising, Opportunities, United States
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Saturday, October 4th, 2008
Do you want to become part of a well-known franchise family but hesitate because of the legwork involved in launching the new franchise location? You should consider taking over a franchise that’s already in existence. Take a look at the pluses involved in the transaction:
- You’ll be up and running right away. When you take over a franchise, it’s already in operation – which means that you don’t have to go out and search for real estate to purchase. Additionally, in the case of transferral, the current staff of the franchise will stay on, meaning that you don’t have to conduct interviews and hire new employees. Furthermore, you’ll have a well-established customer base and solid venues. The result of all of this? You’ll be able to start conducting business right away.
- You’ll have a good grasp of historic profitability. However, you shouldn’t just purchase any old existing franchise; one primary reason that existing franchises are sold is that the franchisee bails because the business’s financial figures aren’t what the franchisee expected them to be when coming in. As a prospective franchisee for an existing concept, you have complete access to the business’s monetary records and earnings history – take advantage of this. Do the numbers look solid? Go for it. Are the earnings questionable? Don’t be afraid to walk away.
- You’ll avoid paying certain fees. Closely inspect the franchise agreement for the company you’re looking into. You’ll probably be entering into the existing franchise agreement, rather than a new one, which could be a great advantage to you. For example, the fees paid to the franchisor in the existing agreement might be lower than those that a new franchisee would be required to pay. However, you’ll have to pay a transfer fee, which could be considerable. Be aware that the franchise fee can also be a percentage of the purchase price.
When considering purchasing a concept, remember to do the following:
- Figure out why the original franchisee is leaving the business. He may be selling due to poor relations with the franchisor – which would affect you as well.
- Take a look at relevant location demographics – are they shifting in a way that could negatively affect your business? Consider market trends and predictions.
- The exiting franchisee has the primary say regarding the actual purchase price for the existing franchise. While you may have some say in this matter, the exiting franchisee has the final word. Be aware that the vast majority of franchise agreements give the franchisor right of first refusal when an existing franchise is up for sale – that is, the franchisor has the legal right to purchase the franchise before it can be put up for sale. To your advantage, there is usually a window of time during which franchisors can make this decision; find out how long this window generally stays open.
Tags: Business, Directories, Due diligence, franchise, franchise fee, franchising, Opportunities, Transfer
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