The costs of opening a franchise vary from industry to industry. It goes without saying that the cost of opening a Hilton Hotel franchise is significantly greater than a Business Coaching franchise.
When comes to looking at the costs of opening a franchise, it is far more easier (and accurate) to look at the Total Investment required.
Total Investment represents the cost of the franchise fee, premises rental (if required), fixtures, fittings, equipment, inventory, professional fees, marketing launch and more. It encompasses all the costs associated with opening your business.
The Total Investment also includes working capital to see you through your first months of trading.
For example, the Total Investment for opening a Senior Care franchise may come to around £150,000 in the UK or $250,000 in the USA and will include all franchise fees, setup costs and initial marketing to get those first clients through the door. You then may also want to account for working capital to see you through your first several months of trading, bringing your Total Investment to £200,000 in the UK or $350,000 in the USA.
Every franchise company has its own qualifying criteria on what your financial requirements are. As part of the Franchise Discovery Process you will usually be required to provide financial statements so that the franchisor can get an understanding on where you are financially.
If you are going to be cutting it close to the line financially, the franchisor may suggest that you hold progress for a while until you are better positioned financially to afford it. This is to maximise your chances for success.
Banks and specialist Lenders look favourably upon franchising and will loan franchisees up to 70% of the Total Investment (including working capital to get you started). They do this largely because franchise models are scalable and repeatable – they have seen each franchise work successfully many times over, thus they are able to lend with a reasonable amount of security as to the projected success of the business.
You will find that the franchise teams within banks will have a list of accredited franchisors who they will lend to (which also reflects a degree of security as these franchisors have been vetted).