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Franchise Startup Costs: What to Expect

So, you’ve been thinking about investing in a franchise, but the first thing that typically comes to mind is the cost. Maybe you’re questioning whether you’re financially stable enough to embark upon such a business endeavor.

Still, you’ve been dreaming about the freedom of being your own boss for as long as you can remember, so you’d do just about anything to make this dream become a reality. Here are some prompts to keep in mind while trying to calculate the cost to open a franchise.

What are the typical franchise startup costs? 

Franchise costs will vary depending on the industry, size of the location, and type of market where the store is located. Franchise costs can range from as low as $10,000 to as high as $5 million, with many investors finding satisfying ROIs in franchises that cost in the $100,000-$300,000.

Now, if you don’t have that kind of money lying around to invest, you will need to apply for a loan with either the franchisor, lender, or a bank. Make sure your credit is in good standing, so you have the best chances of securing that loan for your new business.

Uni K Wax partners with leading finance companies to help provide competitive rates for loans and equipment leasing options. A massive relief for potential owners looking to run a new franchise without the burden of coming up with the required cash up front.

I see things in an FDD, but does that cover everything? 

Before signing a franchise agreement or exchanging money, a franchisor must provide the franchisee with an FDD, or Franchise Disclosure Document, at least 14 days in advance.

This document provides prospective franchisees with pertinent information on what they can expect from a business relationship with the franchisor, so the terms are clear from the beginning.

Each FDD has enough information for a potential franchisee to make an informed decision on whether they want to invest in the franchise or not. These list items include how long the franchisor has been operating, the level of experience the executive team has in running the franchise system, litigation parameters, financial statements, restrictions on what the franchisee may sell, trademarks, all fees required, and more.

What will the fees cover?

The franchisee is first responsible for paying a franchise fee that covers licensing or the right to use the company’s brand, intellectual property, and products.

In addition, franchisees can expect to pay startup costs, including real estate and property improvements and professional services like lawyers, engineers, and architects for any zoning or legal concerns. Supplies, furniture, fixtures, and insurance should be included in the initial investment. Marketing and advertising fees plus working capital will also account for a portion of your franchise startup costs. 

A few things a new franchisee should try to avoid are overpriced business equipment, unnecessary marketing costs, large inventory and supplies, and high labor costs. See what your franchisor support system includes before spreading yourself too thin.

Are there hidden fees?

Now that we’ve covered what franchise startup costs should be disclosed upfront, what about any unexpected expenses that could spring up as you build your dream business?

Travel costs, equipment purchases, royalty fees, material sourcing costs, and additional fees could sneak up on you, so it’s best to ask your potential franchisor up front if they foresee any of these hidden expenditures in your case.

Uni K Wax prides itself on offering financing options for new owners who qualify. The company directs potential franchisees to sources who have previously provided financing opportunities to other franchisees in equipment leasing, construction, and SBA loans. A complete support system for your new business venture is only a phone call away.

Join a brand revolutionizing the waxing industry — request info today to learn more about franchising opportunities with Uni K Wax.