Every franchise is different in its products and services and hence the cost of them vary depending on diverge factors. Buying into a franchise has to be a conscious decision that is taken after thorough analysis. It is necessary to know the basics of franchise business cost. Exploring what are the various costs involved, how fees are charged and what is the contribution distributed among franchises for shared services by the franchisor.
Cost of Franchise
A Franchisor has the right to set a prize for the sale of the ownership to produce or distribute products and services of which the trademark is owned by his/her business. Franchise cost is the initial investment that a franchisee makes towards purchase of such ownership. Most franchises cost range in between $10000 to $50000. The franchise cost typically covers setting up support, site selection and cost of initial training. The other costs vary from business to business. In many cases Franchise cost is the upfront payment made for purchase of the ownership.
Set-up Cost Cost
Incurred in setting up varies from franchise to franchise with in a business depending on size, location and capacity purchased. The actual set up cost can be ascertained only after selecting site location. Planning and designing the franchise is possible only at this point. However a franchisor will be able to provide average figures from their past experience.
Inventory, Supplies and Working capital
Costs incurred on purchase of inventory, supplies and working capitals have to be arranged for the initial term to start the business.
As and when franchise provides services related to training, new technologies adopted, promotion in local region or any other service, charges will be incurred by the franchisee for such services.
Royalty fees is an ongoing fees charged by all franchisors which is either a fixed cost or percentage of the total sales. Renewable Fees All franchises are purchase of ownership for a specific term, commonly ranging from 2 years to 5 years differing from franchise to franchise.