All kinds of people decide to open franchises, from experienced business owners to employees dreaming of being their own boss. Because of the nature of franchising, not a ton of business experience is necessary to succeed. That being said, one of the most important things to learn about is business expenses. Understanding and managing your cash flow is vital to being a good business owner. Here are four business expenses that new franchises may overlook. Be sure to research all of these for any franchise you are considering joining.
Most franchisees have set prices for the entire package of opening a new location. The first things you pay for are your initial investment and training. What many people fail to realize is that this initial cost is not the only training fee you will have over the course of your business. Many franchises require additional training. This can be for business owners as developments are made in the company. Other times the training is for employees. Before committing to a franchise, ask about their training prices. Be sure to find out who needs training, how often, and how much it costs.
This is one that slips the mind of all but those very familiar with franchises. Some of these companies have annual retreats, training, or conventions that representatives from all their locations must participate in. Failure to attend mandatory events is a not so smart way to raise your franchise prices. Be clear on this from the beginning as well. What is required from business owners in the franchise? What events must they attend? What is the consequence for not attending? Keeping an eye on these expenses is important so that they don’t add up under the radar.
Franchises run on royalties. The parent company earns a percentage of the profits from all of its locations. Sometimes this is for a measured amount of time. Other times royalties continue until the franchise makes a certain amount of money. Some franchises pay royalties for as long as they exist.
Understanding your parent company’s royalty policy is necessary because it is one of your main business expenses. A few percent every month may not seem like much, but if you end up struggling, that small amount could be what breaks you. This is why choosing a franchise with low royalty fees is best. Do your research before committing to a specific brand.
Thinking more long term, what is your plan for your franchise? Whether you want to sell it or transfer the business to another owner, you will most likely need to pay a fee. It is never too early to start looking at this expense. Putting money aside for this as soon as possible can help you a lot. If you know the franchise prices for transferring and have the cash saved up, you are free to leave whenever you want. Having an exit plan from the beginning is the quality of a strong business owner.
Are you ready to start running your own company but don’t have any idea how to start from scratch? With a franchise, you don’t have to. A Better Solution in Home Care can help you open a business for an initial investment of just $50,000. They provide all the training you need to succeed, even if you know nothing about business or healthcare. Visit our website to learn more.