How Much Money Does it Cost to Franchise Your Business?
Understanding the costs involved in franchising your business is an important step in evaluating the franchise development process and choosing the right path for your business. There are many steps and stages to the franchise development process and the best way to understand and evaluate the cost is to focus on two stages comprised of the Franchise Development Stage and the Franchise Launch Stage. Both stages are equally important and you must consider both of them when evaluating the real cost of franchising.
Stage 1 – The Franchise Development Stage
The franchise development stage is the stage where all of the development work goes into evaluating your business, developing a franchise plan and creating your franchise disclosure document (FDD). This development stage, depending on who you are working with, should take between three to nine months and should involve the achievement of goals and tasks that include: Evaluating your business model and brand, evaluating and registering your trademarks with the United States Patent and Trademark Office, establishing a development strategy and recommended franchise metrics to be incorporated into your franchise system, preparing your franchise disclosure document, preparing your franchise agreements, preparing your operations manual, establishing the corporate entities for your franchise company, working with your accountants to obtain the necessary financial statements for your FDD and working with other professionals that may be involved in your business, and registering your FDD in targeted franchise registration states.
What Are the Costs Involved at Stage 1?
Naturally, the answer to this question will vary depending on who you speak to and who you are working with. A problem area arises because sometimes when evaluating franchising proposals or speaking to franchise lawyers or franchise developers, it becomes difficult to compare "apples to apples" and "oranges to oranges". So to truly compare and understand the costs you must insist on a detailed proposal, you must insure that the development services include the services that we have outlined above and that you are dealing with an experienced franchise lawyer (always ask for references and to speak to actual clients).
At Stage 1 you should expect the cost involved to range anywhere from $30,000 to $75,000. Factors that will influence this estimate will include the level of service required for your business and your participation in the development process. For example, you will be on the lower end of the spectrum if you already have your own operations manual or if you plan on preparing the operations manual yourself. There are many other variations to consider. Also keep in mind and consider that if you see rates substantially lower or substantially higher, there is probably something wrong. Also, consider that quality is much more important than quantity and a high price does not always equate to higher quality and more valuable services.
What Do We Charge?
If you are considering our franchise development services, the good news is that we offer a completely fixed fee no surprises franchise development program. The program is called The Franchise Launch Program and through this program we offer and provide all of the services outlined above plus a lot more. Best of all we have dedicated clients who can share their experiences with you. As to the cost and a precise fixed fee quote, simply contact us at 800.976.4904 or confidentially send us your information and at no obligation we will email you a complete proposal with a fixed fee. To learn more about The Franchise Launch Program, click here.
Stage 2 – The Franchise Launch Stage
Right now, before you decide to franchise your business, you must consider and evaluate the costs involved at this second stage. Far too often, start-up franchisors are given no information or misinformation about the true cost to franchise your business. Many times this is because no one tells you that there is a stage 2. So at the very least understand that there is a second stage and this stage is all about selling franchises and getting your franchise system up and running.
Many times start-up franchisors go through the franchising process, their FDD is prepared and they are even registered in a couple of registration states but they don’t know what to do next. That next step is the franchise launch stage and the costs involved will be based on your franchise development goals and the level of activity that you expect. For example in year one: Is your goal to sell one franchise or five franchises? Do you plan on hiring an in-house sales person or will you phase in the sales process and rely on organic sales? Will you be upgrading your website and hiring a marketing company to develop franchise sales materials? Will you be attending franchise trade shows? When you do sell a franchise do you have the team in place to provide training and franchisee support? There are other questions but the point here is to understand that there is a next step and to involve these questions in your decision making process and in your discussions with your franchise lawyer or franchise developer.
What Are the Costs Involved at Stage 2?
There is significant variation and a lot will depend on your goals. Many franchise systems scale-up over a three-year process and focus on less expensive and more organic and slower growth while others follow a more aggressive strategy. So much will depend on your goals but consider that, at a minimum, in the first year of your franchise launch you should be spending no less than $25,000 to invest in your franchise infrastructure.
What Do We Charge?
Post launch we offer emerging franchisors development services that include continuing legal support and representation, development of franchise sales materials and opportunity guides, development of prospective franchisee nurturing campaigns and other levels of strategic support. We are firm believers that when it comes to franchising you should not rush the launch process and your franchise goals must be based on realistic 2 year, 3 year and 5 year goals. If you have unrealistic franchise sales goals (i.e., you try to do too much in year 1), many times you will be wasting money. Our Franchise launch services are focused on a 12 month horizon with realistic goals for emerging franchisors. Our fee is a completely fixed monthly fee that starts at $1,250 per month. To learn more about this post launch legal and franchise support program, click here.
Avoid the Franchise Vultures
The reason that we discuss Stage 1 and Stage 2 is to better equip you for understanding the franchising process and the costs involved. Before hiring a franchise professional, discuss both stages with them and always insist on detailed proposals and referrals from their clients. Also keep in mind that while there are some amazing franchise law firms and franchise professionals out there and ready to add value in creating your franchise system, there are also franchise vultures out there. These franchise vultures may be making big promises and may be making franchising sound easier and less expensive than it really is but, in the end, these franchise vultures don’t expect your franchise system to ever get off the ground. Entire industries exist around offering and providing start-up and emerging franchisors with services that are either overprices, ineffective or completely unsuitable for creating a franchise system that is built for success.
If you would like to learn more about the differences between franchise lawyers and franchise consultants, click here.