Right Franchising

Tag Archive: working capital

Franchises: How to Buy One…

…And Still Afford Lunch (not just at a Franchise)

Most people drive down the street and see McDonald’s, Burger King and Chik-fil-A.  They believe that is the extent of a franchise.  So, let’s look at some facts.  Below is a good statistic provided by the International Franchise Association that shows the financial cost of a franchise and the percentages of franchises found in each financial segmentation.

Cost of Franchise Businesses graphic

 

Notice that 52% are under $100,000.  This figure would include everything you need to open the franchise, and often includes three months of working capital.  With a 690 or better credit score, you would put down $20,000 or $30,000, and the remainder would be funded with an SBA loan or other funding sources.

Also, notice that only 5.6% are over $500,000.  A McDonald’s franchise costs around $1.8 million for example. Of those 5.6% of franchises, they fall in many categories; restaurants are more likely going to be at the higher-end cost. There are great franchises for $500,000, and great franchises for $75,000 or less. I’ll help you choose the one that fits your needs best.

So, then you may be wondering, “If I invest more money, will I get a better return or a higher profit margin?”  It has been my experience as a certified franchise consultant that there is NO automatic correlation between the cost of the business and the PROFT it can earn.

Surprising? Yes!  But when you want to really evaluate a business, the best approach is to figure the net profit the business can generate.   So, what is net profit?

“Net Profit is the actual profit made on a business transaction, sale, etc., or during a specific period of business activity, after deducting all costs from gross receipts”, as defined by Dictionary.com.   It is easier to say, sales minus expenses.

Right Franchising understands this and matches candidates to the right franchise; one you can afford and one that generates a solid net profit for you and your family.  We do this with real numbers that you can validate with other franchisees (other owners) in the franchise system.  It is easy to do and really helps you make an informed decision.

So, if you’re ready to take the next step of checking out a Franchise, give me a call. I’d love to help you find just the Right Franchise! Franchise.  Call me at 877-307-1458 and let’s get started!.