Starting a business comes with some unique challenges. As you explore your options for launching, you’ll likely hear things about franchising that might strike fear into your heart: it costs a lot of money, the training is expensive, you have to buy the branding rights, and so on. All of these things can be true, but there are also often hidden costs when starting any business. With franchisee costs rising at an unprecedented rate, many prospective franchisees assume that they can’t afford to launch with a franchise. But if you do your research and keep an open mind about your financing options — including grants and loans from friends or family — there are plenty of affordable ways to get started as a franchisee. This article will cover most of franchise myths and what’s the real thing .
Franchise Myths: The Cost of Becoming a Franchisee
One of the biggest upfront costs when you buy a franchise is the franchise fee. But franchising is a numbers game, and the price of a franchise is also determined by competition between franchisors and the performance of the franchise system. If you buy into a franchise system with a high franchise fee, expect to wait a long time for that investment to pay off. If you buy into a franchise system with a relatively low franchise fee, the return on investment may come more quickly. But these costs are only one part of the equation. Many would-be franchisees forget to factor in other important costs, too, from travel expenses to professional services such as consulting, legal, and accounting.
Franchise Myths: Franchise Consulting and Legal Fees
The good news is that most franchisors provide consulting services, including site selection, market research, and operations training. But if you want your franchisor to help you find the right location or do a market analysis, you’ll likely have to pay for it. Consulting and legal fees are common in any business, franchised or not. If you’re launching a franchise, you may have to pay even more upfront costs to legal and consulting professionals to help you navigate the franchising process. Franchisors will sometimes charge you a franchise fee as part of your upfront costs, while other times they’ll collect these fees directly from you. It’s important to know the difference, since franchisors may be charging you for these fees as part of the purchase price for the franchise, which is included in your loan.
Franchise Myths: Franchise Royalties and Advertising Costs
Royalties are the fees you pay to your franchisor for their intellectual property, including your brand, logo, and website. As with consulting and legal fees, you may or may not have to pay these upfront. Franchisors will often collect them from you over time as a percentage of your sales. To get a rough idea of how much you might be paying in royalties, think about how much you want to make in annual sales and multiply that by the number of years you plan on operating your business before paying off the loan. If you’re opening a franchise with a well-known brand, you’re likely to pay more in royalties. Franchise systems with a high level of brand recognition and consumer loyalty, such as McDonald’s and Wendy’s, have a high royalty rate.
Franchise Myths: Franchisor Maintenance Fee
Some franchisors charge a maintenance fee, which is usually a percentage of your sales. A franchisor usually will collect this fee quarterly. The maintenance fee covers the ongoing support and services franchisors offer their franchisees, including marketing support, management training and coaching, and general legal services. Franchise systems that charge a maintenance fee are often newer, smaller franchisors without the name recognition of larger brands. As a franchisee, you can negotiate the terms of your maintenance fee, so make sure to ask about it during the due diligence process.
Franchise Myths: Facilities and Equipment
The good news about this cost is that some franchisors will help you find a location for your franchise and even help you finance the lease. The bad news is that many franchisors won’t help with these upfront costs, which will be your responsibility as a franchisee. As with any business, you’ll want to make sure your space is appropriate for your industry. Franchisors often collect this fee as part of the franchise fee. If a franchisor doesn’t charge you a facilities fee upfront, make sure to negotiate this into the terms of the franchise agreement.
Franchise Myths: Staffing Your Franchise with Employees
Before you open your franchise, you’ll likely need to hire employees to get ready for the first day. Franchisors often cover this cost as part of your initial training, but if they don’t, it’s important to know that you’ll be responsible for paying those employees. Franchisors often collect this fee as part of the franchise fee. If a franchisor doesn’t collect it upfront, make sure to negotiate it into the terms of the franchise agreement.
The Bottom Line
Franchising is a good choice for many entrepreneurs, but it’s important to do your research before committing to a franchise. If you find a franchise that seems like a good fit for you and your business, consider these upfront costs as part of your decision-making process. Remember that you’re not just buying a franchise, you’re buying into an entire franchise system. That includes the franchise owners who may be investors in the system and the franchisor who will support you along the way.
Become a Spartans Boxing Club Franchisee
With a proven business model that has returned incredible profits year-over-year for our franchisees and an offering of all that you need to succeed in the operation of your franchise, there’s no better opportunity than the one here at Spartans Boxing Club.
If you’re interested in becoming a Spartans Boxing Club franchise owner, or you simply want to learn more about the business and its offerings, be sure to contact us at firstname.lastname@example.org. We look forward to hearing from you!