Basic Line of Expenses that a franchisor has to plan in advance to get right things at right place.
The franchise fee
The first expenses you will encounter as a new franchisee is the franchise fee.
This is an upfront payment made to your franchisor for the use of the franchise name and blueprint, and in some cases, it covers the cost of training, support, leasing assistance and setting up the business.
For most mainstream businesses, this fee can be anywhere from $20,000 to $50,000.
The franchise fee is one of the first things you should consider when you are looking into buying a franchise, to determine if it will be within your budget to pursue the business any further.
Lawyer's fees
Consulting an experienced franchise attorney before you sign any documents is in order to protect yourself from one-sided contracts.
Your franchise attorney will help you go over the initial Franchise Disclosure Document, and review the subsequent franchise agreement.
Franchise lawyers' fees can range from $1,000 to more than $5,000 (depending on hourly rates), so it's best to get an estimate up front.
Start-up expenses:
From new equipment, to renovations, to furniture and fixtures - you will have to be able to finance all of these additions and improvements long before you see a dime of revenue.
Inventory and Supplies:
When starting a franchise business, you will have to ensure that you are well-stocked and prepared to meet customer demand from day one.
This means purchasing enough inventory and supplies to get started, and can include everything from office equipment and paper products to food and beverage essentials.
Again, you will want to know what you are looking at before you start, so ask for an estimate before you sign the contract.
Working Capital
You will also need to have enough money set aside to ensure that the franchise business continues to run smoothly as you head towards profitability.
Many new franchisees will not see any revenue until a year after opening, so it is important to have enough money set aside to cover all of the franchise's day-to-day expenses for at least that length of time.