Finance options for your new franchise business

Worthwhile information on financing a business start-up

By Daniel Kehrer, Founder & CEO BizBest Media Corp.

The cost of buying a franchised small business is hard to pinpoint. Nearly all 2,500 franchises operating today have different fees and expenses. Initial fees alone range from a few thousand dollars to millions. The good news is that franchises, with their wide range of price points, offer abundant opportunities at all levels.

The initial fee can range from around $5,000 for some sports and recreation franchises to $6 million for hotels. Fast food concepts range from $150,000 to $3 million. Different operating models abound. While 93 percent of franchises are stand-alone establishments, others include kiosks, home offices, express stores and mobile units.

Franchise buy-in costs vary because:

1) Even within a single industry, business types differ – such as a car wash or repair shop, both in the auto segment.

2) Expenses – such as training or buying supplies – vary greatly by business.

3) Some franchised businesses include a specific territory that can be small or very large.

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Check initial investment requirements by franchising sector

Each industry and sub-sector has a widely different set of initial expenses that make up the investment requirements based on their business model.
Try: An International Franchise Association (IFA) “Special Report” on initial investments required to purchase a franchise offers an excellent overview of franchise buy-in costs. Check a handy comparison chart of initial purchase fees by franchise category. IFA operates an ongoing series of franchise expos for people considering a franchise (check the site for dates and locations).

Compare and contrast franchising costs

Consider purchasing unbiased franchise information products, financial research and analysis to help you make a better decision.
Try: FRANdata is a great place to find independent, comparative financial information on different franchise companies for market assessment and competitor analysis. Check their list of available financial products.

Break out the different franchising cost components

The U.S. Small Business Administration (SBA) has good advice and information about buying a franchise at its Web site.
Try: The SBA’s Consumer Guide to Buying a Franchise includes basic information on initial and ongoing costs.

Line up outside expertise

Franchise consulting firms will help you understand and evaluate fees and costs.
Try: iFranchise Group is a consulting firm that can help you evaluate your readiness to buy a franchise and sort through franchise options and potential sources of financing.

Find your franchise financing

As you consider initial fees, also consider how you will come up with the money.
Try: The Franchise Registry program offers expedited financing to purchase a franchise with an SBA-backed loan. See how to finance your franchise (or other business startup) with money in your 401(k) plan or IRA Rollover.