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Business Opportunities Articles
by : John McGavin
Blueprint for Success

Obviously, you need to be very concerned about your financial ability to not only buy a franchise but also to continue to operate it until such a time as it begins to make a profit. Fortunately, careful due diligence will enable you to determine the financial requirements of your business before you make your decision. Those requirements fall into five basic categories and will be described in detail in the Uniform Franchise Offering Circular (where applicable).

Every business will have certain start-up costs. In addition to the normal capital requirements to launch a business, a franchise system will assess an initial fee that typically covers many items, including the rights to use the name and trademarks of the company, the rights to distribute the company's products and/or services, access to the franchisor's established business systems, initial training, assistance with site selection and a protected territory. An ongoing fee, or royalty, pays for continued support provided by the franchisor, as well as continued use of the trademarks, business systems and enhancements.

Operating capital (sometimes included with start-up costs) is another important factor. It is the money you will need to operate your business until it becomes self-sufficient.
What Does it Cost?

As you review these costs, it is important to remember that there is no automatic correlation between what it costs to buy a franchise and Return On Investment (ROI).
What's the Total Investment for a Franchise? *

  • Under $50,000.00 - 28.6%
  • $50,000.00 - $100,000.00 - 23.9%
  • $100,000.00 - $250,000.00 - 32.7%
  • $250,000.00 - $500,000.00 - 9.2%
  • Over $500,000.00 - 5.6%

*Source: Franchise Times Magazine Survey Franchising is All Right, Thank You.
Typically, you will need 35 - 50 percent of the total investment in cash. Assuming your credit is acceptable, financing of the balance is usually not difficult. Your FranNet consultant will help you identify financing options.

Franchise Selection Decision Plan
How do you eat an elephant? One bite at a time!
Keep your decision making simple - take it one small bite at a time! The following checklist provides a thumbnail sketch of the FranNet Four Step Research Plan, along with estimated costs. Use the table below to keep track of your decision progress.

Date

Action

Estimated Cost

Commitment

 

Meet with FranNet consultant to create Business Model and select franchises to evaluate

$0

None

 

Review of materials received from franchisors

$0

None

 

Initial phone interview with franchisor

$0

None

 

Validation from and/or calls and visits to franchisees - Take Notes!

$10 - $500

None

 

Visit home office of franchisor

$10 - $800

None

 

Investigate financing options (if needed)

$0 - $250

None

 

Basic review with attorney and/or accountant (larger scope may require more time and money)

$300 - $1200

None

 

Decision to invest in franchise

Specified Investment

100%

Remember to review your business model every step of the way. It is your compass and will guide you in determining if you want to proceed with the research. Your FranNet consultant will coach you through this process and can recommend other professionals to assist as needed. This process typically takes 30 - 45 days.

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