Budgeting For A Franchise? Don’t Forget These Costs
The initial costs of a franchise investment should be provided to you upfront. However, there are additional costs that sometimes get lost in the shuffle. This can leave business owners unprepared for the purchases they need to make in order to have a successful franchise location. Speaking of location, the first funds you may need in addition to franchise fees include finances for your storefront. This could be buying land, purchasing a storefront or renting a building. No matter which route you choose to go, you’ll likely be responsible for down payments, monthly payments as well as any improvements you want to make.
In addition to finding somewhere to run your business, you’ll need signage and advertising to let other people know you’re there. This type of collateral is rarely included in franchise agreement, leaving you with the cost. Signs for the side of your building, a billboard or other advertising can cost into the thousands, and is an imperative investment for your franchise location. You can’t have customers if they don’t even know you exist in their neighborhood. So after your building and the signage to accompany it, you will likely need equipment for the inside.
It is common for franchises to sell the equipment franchise owners need to get started especially if they are in the service industry and require specialized equipment. However, this cost is not normally included in the franchise agreement. That being said, franchises often offer long term financing for the necessary equipment to run the business. While this keeps your out of pocket initial expense low, it adds a payment to your monthly expenses. This monthly payment could be just a few hundreds dollars but for more expensive equipment it could reach into the thousands each month.
If you become the invested franchisee of a retail-based company, you also can’t forget about the need for a starting inventory. You will need something to sell and you will most likely have to purchase it up front. Different franchises have different requirements for starting inventories, but it is still an expense for owners. Sometimes this cost is rolled into the initial investment fees, but not always. You don’t want to have everything you need for your franchise except the adequate inventory to actually sell to your customers. Check with your franchise to make sure you don’t under or over stock.
Additional costs of owning a franchise aren’t a bad thing, when they can be planned for and don’t come as a complete surprise. Being able to budget as you explore being a franchisee will help cover some of the start up cost. You can also explore options of personal or business loans. Additionally, you can and should discuss all of these expenses with your franchise before making a final commitment. If you are considering investing in a franchise but haven’t found the right one yet, you should think about Dr Phone Fix. We are actively searching for motivated individuals to open Dr Phone Fix repair locations in their current or new neighborhood.