What's the Cost of Franchising Your Business?

The cost of franchising is often a smaller investment than the cost of establishing even one new outlet. After paying the cost of the franchise program, the remaining costs of expansion (as well as most of the risk) are assumed by franchisees. And since franchisees usually pay the franchisor an up-front fee and royalties, the right strategy for selling your franchise idea can become an immediate high-impact low-risk revenue source.

The fixed and variable expenses involved in running a franchise company are much lower than operating a similar number of company-owned facilities.

You probably already know how much you would pay to establish a new company-owned copy of your existing business.

If you own a restaurant, for example, the cost of buying land and construction, or even the cost of leasehold improvements and furnishings in an existing building, could easily run between $100,000 and $200,000 or more. What you may not know is that for the same amount, or less, you can have a complete franchise development program. And whereas the new company-owned unit might require a year to establish and might not be profitable for another year or two, your franchise program will probably take less than a year to put together and enable you at the end of that period to sell franchises and immediately begin to recoup your investment. If your franchise fee is $35,000-an average nowadays-and if in your first year as a franchisor you sell seven franchises (another average for franchisors according to a study by DePaul University) you could have your program paid for by the end of that first year.

Some businesses are standing by and waiting for this economic storm to blow over while others are positioning their companies to succeed in spite of the downturn. What are you going to do with your business? Are you going to take the imitative to expand in spite of other companies failing around you? How can you capitalize on what you know without having to expand organically with your own money? You need to leverage your intellectual property. Franchising may be the best and only option for you to consider.

With all of the highly skilled people out of work franchising companies are taking advantage of the greatest supply of highly educated individuals that they have ever seen. With unemployment believed to continue to rise over the next year, this opportunity will continue on for a while. Though, once this recession is over and companies stop laying people off and start hiring them again, you may well have missed your window of opportunity to sell franchises in this fertile environment.

The fact is people have lost faith in what have become accepted as "safe" investments. In spite of losses in 401k's and home values, people still have money that they can access. They are also borrowing from friends and family that can contribute to a new business venture, which has always been an avenue for funding a new venture. This will not subside, regardless of the economy.

The challenges of today's economy may have just created the "perfect storm" and the best opportunity for franchising your business. The only real fear would be a competitor seizing this opportunity while you sit back and wait it out.

Christopher_Conner

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