How Much Does It Cost to Buy a Franchise Business.
Easy How to Do It
How much does a franchise cost? It all depends on the franchise. To buy a franchise business, you can expect to pay a franchise fee, all build-out costs for the property, attorney fees, contractor fees, signage and inventory. Each franchise has its own requirements for the buyer. When you buy a franchise business, you get the opportunity to own and run your own business, while you rely on the experience and success of the franchiser. Because it has a track record, a franchise business is more likely to be more successful than a regular small business.
The first restaurant franchise business was begun in 1932, when Howard Deering Johnson franchised his Howard Johnson's restaurants. A franchise business lets independent owners use the same name, food, products, logo and even building design in exchange for a fee. The franchise is a successful business model with over 767,000 establishments that operate in 70 industries with annual revenues of over $1 trillion.According to the International Franchise Association approximately 4% of all businesses in the United States are run by franchisees like yourself.
Partnering with a franchiser gives you a better chance at success, because you will work with a planned system and an attractive concept. As the owner-operator of a franchise business, the parent company expects you to follow a business plan, supervise employees, and manage finances. You can expect to be involved in your new business on a daily basis.
How Much Does It Cost to Buy a Franchise Business?
The cost to buy a franchise business depends upon whether or not real estate is involved. If real estate is required, you can get your franchise by purchasing an existing building from the franchiser. Otherwise, you can assume the cost of constructing a new building from the ground up. If you will rent or lease a location for the franchise business, the start-up cost is much lower.
The cost of any franchise business will vary depending on a number of factors, including the expected volume, profitability, competition, and location. You should expect to finance a substantial portion of the initial cost, and have a good credit record. Determine how much capital you can invest in the venture. The cost of a franchise business includes the start-up investment, plus monthly royalties based on your sales revenue. As in any business, you will also require working capital to operate the franchise. The Franchise Disclosure Document, FDD, must disclose the terms and conditions to buy the franchise business. There is no guarantee how much money you will make, if any.
The franchiser sells you a franchise as a way to expand the business quickly and with less risk, by using the capital and expertise of the franchisee. A franchise usually lasts for a fixed time period, from five to thirty years, so it is actually a temporary business investment, rather than permanent ownership.
Here are a few estimates of the start-up cost to buy one of the major franchise businesses.
|Cost to buy a franchise business|
|FRANCHISE|| COST TO BUY|
|Subway restaurant franchise||$84,000 to $258,000|
|McDonald's restaurant franchise||$1million to $1,800,000|
|7-Eleven Inc. convenience store||$40,000 to $775,000|
|Hampton Inns & Suites hotel franchise||$3,700,000 to $15,000,000|
|Great Clips hair salons||$110,000 to $200,000|
|H&R Block tax preparation||$26,000 to $85,000|
|Dunkin Donuts bakery||$540,000 to $1,800,000|
|Jani-King cleaning service||$12,000 to $35,000|
|Servpro insrrance and cleaning||$110,000 to $160,000|
|MiniMarkets convenience store||$1,800,000 to $7,600,000|
Almost every familiar consumer business brand is available as a franchise business. The top 10 franchises are listed above. But the roster of franchise possibilities goes on, KFC, Burger Kingm Wendy's, Taco Bell, Domino's, Little Caesar, Subway, Merle Norman, Chic-fil-A, Krispy Kreme, Dollar Store, Hard Rock Cafe, and General Nutrition Center. These familiar franchises are restaurants, gasoline stations, retail stores, cosmetics stores, hotels, spas, services, and even hospitals.
Eight Guidelines to Buy a Franchise Business
Franchise brokers can help help you find an appropriate business to buy. As you shop for a franchise business, look for an opportunity with these features:
The franchiser and other franchisees are profitable
- It operates in an industry where you have experience
- The location has good traffic and demographics,
- It has a familiar brand and service
- Franchise fees and royalties are affordable
- The company provides good support and training
- The company runs advertising programs in your area
- The franchise business is relatively easy and inexpensive to operate
- The franchise includes exclusive rights to do business in a local territory.
I wish you much success in life. I hope you have a very happy day.