Be your own boss: affordable franchises.There are franchises out there that don't have to cost you your first born. (Disclaimer: they may cost you your second born.) Many of these less costly franchises are service-based businesses that deliver services to their customers (like The Maids residential cleaning franchise) or distribute products (like Happy & Healthy's frozen fruit bar distributorship) to retail and business customers. There are hundreds of affordable franchises out there, some of which are detailed in the attached websites. Some common questions when considering a franchise are: "'How much money should I set aside for working capital; "How much can I make in the first year "; "Do I need to open a second location to double my income?" and "What are the hidden costs involved with starting a business. " For the purpose of this article, let's define affordable franchises as those with a total cost between $10K and $250K. While there are no absolute formulas for costs, let's cover some basics. Initial franchise fees can range from a couple hundred dollars to several thousand dollars. Eighty-eight percent of franchises have an initial franchise fee of less than $40K. You can expect to pay royalties in the range of 3-25% on gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. , with the average royalty percentage being between 3-6%. Initial inventory and initial setup costs are going to vary widely depending upon the business. However, at a minimum, most franchisors expect you to have three (3) months of monthly expenses set aside as working capital to help you get through the first few months, often the first year. One of the biggest mistakes small business owners make is not budgeting enough for working capital, so make sure you talk to several franchisees to determine an appropriate amount for your particular franchise. When you add all the costs and fees, roughly 75% of franchise systems require start-up capital of less than $250K. Once you've tackled working capital, the next big question typically is, "how much of an owner's salary can I draw during the first few years?" The good news is, one of the biggest advantages of joining a franchise system is the ability to learn from other franchisees' successes and failures. Ready for the bad? You should typically plan on drawing less money from the business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets during the first year than you hoped. This translates into a smart business plan of 3-12 months of living expenses set aside, ON TOP of the budgeted owner's salary, to ensure your ability to get through any bumps bumps a term used to describe a variety of papulonodular dermatoses in horses, including 'heat bumps', 'feed bumps', 'protein bumps', 'wheat bumps' and others. No specific disease or etiology has been assigned to the term and veterinary dermatologists wish it would disappear from use. you encounter at the beginning. Having 3-12 months of salary, in addition to 3 months of working capital, may seem like a lot of money. Your best bet when attempting to determine any of these answers is to first ask the franchisor the question, and then ask several franchisees their approach. This will help determine how closely their budgeted model matched reality. Let's expound ex·pound v. ex·pound·ed, ex·pound·ing, ex·pounds v.tr. 1. To give a detailed statement of; set forth: expounded the intricacies of the new tax law. 2. upon these concepts with two popular franchise examples: Pressed4Time, a dry cleaning dry cleaning, process of cleaning fabrics without water. Special solvents and soaps are used so as not to harm fabrics and dyes that will not withstand the effects of ordinary soap and water. Dry cleaning began in France about the middle of the 19th cent. pick-up and delivery service, and Money Mallet mallet, n a hammering instrument. mallet, hard, n a small hammer with a leather-, rubber-, fiber-, or metal-faced head; used to supply force or to supplement hand force for the compaction of foil or amalgam and to seat cast , a direct mail and Internet advertising Delivering ads to Internet users via Web sites, e-mail, ad-supported software and Internet-enabled cellphones. Also called an "ad network," Internet advertising organizations act as a middleman between the advertiser and the Web sites and software publishers that display the ads. business. For the purpose of this hypothetical exercise, let's assume your monthly living expenses equal $3K, and that you have set aside 3 months of living expenses and 3 months of operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . For these two franchises, there is no additional inventory or start-up supplies requirements--the franchise fee includes the initial set of supplies required to start the business. Operating expenses will vary by franchise and by franchisee; however, since both of these particular franchises can be run from your home, your monthly operating expenses won't have to include an incremental cost Incremental Cost The encompassing change that a company experiences within its balance sheet due to one additional unit of production. Notes: Incremental cost is the overall change that a company experiences by producing one additional unit of good. for rent. Let's assume the monthly operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. to operate each of these businesses is $3K (insurance, transportation costs, marketing, advertising, etc.). Now, multiply that by six (3 months living expenses and 3 months operating expenses), and you'll need $18K as an initial cash budget to start your business, in addition to the initial franchise fee and other franchise specific costs. Again, it is critical to consult the specific franchisor in question on their suggested initial cash requirements, as many systems suggest having 12+ months of living expenses set aside to start their particular franchise. So, "'Do you need to open a second location to double your income?" Not necessarily. Many service-based businesses like the ones used in our example, are not contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent a fixed location to generate their revenues because they deliver a service to their customer base wherever their customers are. While the physical location of a retail business limits the number of customers it can serve at any given time, many service businesses depend on factors such as the number of people employed. Hence, as the business grows, employees are added to keep up with the demand. As Robert Myers Robert Myers is a theoretical physicist. Myers is a professor of physics at the University of Waterloo and at the Perimeter Institute for Theoretical Physics. His research concerns string theory and quantum gravity. , a franchisee with Express Personnel Services in Baton Rouge Baton Rouge (băt`ən r  zh) [Fr.,=red stick], city (1990 pop. 219,531), state capital and seat of East Baton Rouge parish, SE La. , LA explained, "For a retail
store, location is critical. If you're not in a high volume area,
you will have limits on your earning potential, whereas with a service
businesslike busi·ness·like adj. 1. Showing or having characteristics advantageous to or of use in business; methodical and systematic. 2. Purposeful; earnest. 3. Express Personnel, you don't have that same (earning potential) limit. The long-term affordability of my business is reasonable when you factor in that you don't have to double your in vestment to make double the return". In closing, remember that 1) affordable franchises do exist; 2) planning conservatively for your finances rarely hurts; and 3) research several options to find the best one for you. If you follow these simple rules, you should be able to find an affordable franchise for you and keep your second born child.
Pressed4Time Money Mailer
Royalty Fee 4-6% $440 per mailing
zone (fixed)
Minimum Net Worth $50K $75K
Initial Franchise Fee $18.5K $35.5K-$48.5K
(size dependent)
3 Months of Living $9000 (example) $9000 (example)
Expenses
3 Months of Operating $9000 (example) $9000 (example)
Expenses
Total Initial $36.5K $53.5K-$66.5K
Investment (example)
Additional Resources for Home Based and Affordable Franchises Entrepreneur Magazine--http://www.entrepreneurmag.com International Franchise Association--http://www.franchise.org The Entrepreneur's Source--www.TheEsource.com/MHoward Inc.com--http://www.inc.com Eranchise.Com--http://www.franchise.com Franchise Times--http://www.franchisetimes.com Small Business Administration--http://www.sba.gov Hark hark intr.v. harked, hark·ing, harks To listen attentively. Idiom: hark back To return to a previous point, as in a narrative. N. Howard, President of The Entrepreneur's Source, Dallas, Texas “Dallas” redirects here. For other uses, see Dallas (disambiguation). The City of Dallas (pronounced [ˈdæl.əs] or [ˈdæl. (esource4u@comcast.net) |
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