Buying a franchise is an attractive move because of its potential to be a lucrative business. It costs relatively less than building your own business from the ground up, but it can give you almost all the perks of a startup. So now you’re looking up the cost of franchising a popular restaurant. You may be thinking, “All I need to do is secure funding for the franchise fee, and I’m good to go.” Think again.
You need to consider several things when buying a franchise. Here are some of the commonly overlooked costs you need to expect:
Travel Costs
Once you have your heart set on a brand, the franchisor may invite you over for a Discovery Day. You don’t want to skip this event because this is where you’ll have your first encounter with the brand as a franchisee. You’ll learn about the business’s franchise model and what it means for you since you’re buying into it.
Depending on how far you are from their headquarters, you’ll have to allot finances for travel and accommodation expenses. The company may offer to cover some of the expenses, but most of the expenses will still fall on you.
After you’ve signed the franchise agreement, you also have to account for the training days, plus any conventions the franchisor requires you to attend. These are also a necessary expense since these will help you learn the ropes of the business and all the responsibilities you’ll soon take on.
In any case, remember to keep all of your travel and accommodation receipts so you can write off the expenses to your business.
Franchise Advisor or Coach
Starting a business alone can be tough, even if you’ll be following the franchisor’s model. Although optional, you may want a franchise business coach to guide you because you’ll get advice on maximizing your investment and avoiding major losses.Your franchisor can help you business-wise, but that would mostly be limited to how your relationship with each other would be.
Legal and Accounting Fees
You’re going to need people to help you with the more technical side of running a business. Buying a franchise involves plenty of paperwork, which can be difficult to comprehend for a beginner. A qualified franchise lawyer will help you navigate the legal side of franchising. They’ll help you review the franchise agreement and Franchise Disclosure Document (FDD), so you can better understand your duties as a franchisee. The fee of a franchise lawyer can vary depending on the number of consultation hours you spent.
You also want to hire an accountant to do your books, even if the franchisor provides you with record-keeping software and tools. The accountant can help you set up your book and records, determine how much capital you need for the initial opening, and how much more you’ll need to maintain operations.
Although a franchise is easier to set up than a startup, you have to treat it as though you conceived it. Make sure to have all the possible expenses plotted and projected. And be financially prepared to carry out your business plan.
