Are you considering buying a franchise? Do you want to get some of the best franchise business ideas? Buying a franchise business is a major investment. It’s a big commitment of time and money. How long will it take you to make a profit? What is the success rate? Are there other options to starting your own business? We’ll see the answers to all these questions below. There are a few things here that you might definitely want to be aware of before you take the big plunge.
What Are The Initial Startup Costs?
Let’s look at some of the top ranked franchises and do a little comparing of the startup costs. Listed below are some franchise businesses you might consider owning and their startup costs:
- 7-11 – Approximate startup cost: $50,000 – $750,000
- McDonald’s – Approximate startup cost: $1,000,000 – $2,225,000
- Subway – Approximate startup cost: $120,000 – $263,000
- Taco Bell – Approximate startup cost: $1,200,000 – $2,600,000
- Dunkin’ Donuts – Approximate startup cost: $225,000 – $1,700,000
- Dairy Queen – Approximate startup cost: $360,000 – $1,800,000
- Hilton Hotels and Resorts – Approximate startup cost: $56,000000 – $97,000,000
- Days Inn – Approximate startup cost: $170,000 – $7,700,000
- Super 8 – Approximate startup cost: $125,000 – $4,000,000
- H&R Block – Approximate startup cost: $31,000 – $150,000
- The UPS Store – Approximate startup cost: $160.000 – $435,000
- Merry Maids – Approximate startup cost: $56,000 – $180,000
- Anytime Fitness – Approximate startup cost: $80,000 – $500,000
- Massage Envy – Approximate startup cost: $410,000- $950,000
- Supercuts – Approximate startup cost: $180,000 – $350,000
- Pearle Vision – Approximate startup cost: $410,000 – $625,000
- Ace Hardware Corp. – Approximate startup cost: $270,000 – $1,500,000
The startup cost to open a franchise business can be anywhere from $20,000 to $96 million or more! You will also have to pay a percentage of your sales in royalty fees to the franchise. Many franchisees are required to spend a certain amount of dollars on advertising too.
How Long Before I See A Profit?
According to a report on food franchising in North America, half the restaurant’s profits are less than $50,000 a year with the average being $82,000. That’s not too bad, right? But subtract the initial investment and you’re probably not making any money in the first year.
In addition to the startup costs, you should have at least enough cash on hand to cover the business expenses for 6 months and enough to survive for a year with your personal expenses.
When you will see profits all depends on a number of things. The location of where you start your business has a great factor in it. How much advertising are you going to do? People need to know your in business. Just because you have an “OPEN” sign in the door, doesn’t mean people are going to flock in.
You won’t really get a straight answer out of the franchisor about this question either. They don’t want to promise or quote you anything. You could come back and try to sue them if you weren’t making a profit by the time they said you would. You are taking a big risk.
What Is The Average Success Rate?
Franchise businesses fail at about the same rate as all businesses do. Two-thirds of businesses with employees will last 2 years. Half will survive for 5 years. After that 90% of the franchises will continue to operate.
Imagine that you just get your Subway business going and you’re starting to see some headway. Things are finally starting to look good for you. Then someone has the nerve to open up a Subway business just 2 blocks away! That’s right where all the traffic drives by to get to your Subway so they all stop at the other Subway. It happens, and there is nothing you can do about it.
A Few More Thoughts To Consider
Another thing to consider is not to be late on any of the royalty payments. Do not violate the franchise’s operating procedure either. These could end up in the franchisor terminating your agreement and you would lose your entire initial investment.
You must not get creative with the food or the coloring of the walls or the building. You will have a strict set of rules to go by that the franchisor will set up with you ahead of time.
Let’s say you decide that you want to move on and get out of the franchise and start your own similar business. That’s a big NO, NO! There are restrictions put on you that limit you from business opportunities similar to the franchise for years after your contract expires.
Some franchises will only sell to people who have had prior experience working at the company for a certain amount of years.
Is There A Better Business Opportunity?
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