Learn About Franchise Fees Video

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Learn About Franchise Fees

Learn About Franchise Fees Beth Haselhorst: Franchise has represented some of the biggest names in US business today and if you’re an entrepreneur interested in buying your own franchise you maybe wondering how much you’ll have to spend. Our guest today has the answers. Franchise expert Dick Rennick is an award winning founder of a 360 unit franchise system and former Chairman of the International Franchise Association. Dick is recognized as one of the leading experts in franchising. Welcome to SBTV.com, Dick. Dick Rennick: Thank you. Beth Haselhorst: Okay so let’s talk about the initial franchise fees. I know they can range from a few thousand dollars to more than a million. Is there an average initial franchise fee? Dick Rennick: Yeah, the average initial franchise fee runs between $20,000.00 and $40,000.00. I would say probably 80% of your franchise fees run on that row. Beth Haselhorst: Okay what about total initial investment that you might have to put in including all the factors that go into it. Dick Rennick: Yeah, let’s just say that you bought a fast food franchise and the build-up might be a $175,000.00 to build up the stores. So on top of buying the rights to that franchise to be awarded to you, you might spend let’s just take $30,000.00 with your license fee. So you spend that $30,000.00. You’ve got to have a $175,000.00 to build up the store. You’ve got to have some of the money for advertising and promotions so that might be another $50,000.00. So you maybe looking at $253,000.00 investment just to get the store open. Now you need some staying power. You need some money behind you that keeps this store open while you build the same structure. Beth Haselhorst: It sounds like a lot of money so what can some potential investors, how can they raise the capital? Dick Rennick: Perfect, great question. It is a lot of money that depends on the business. If your fast food or if your a service-based business of course the cost are going to be much different but when you have to do a build up of the store or a build up of something that people are going to walk into that can be costly. So if you’re going to go to a mobile or a home based business cost are going to be less. But the entire costs are dependent upon what you choose and getting the capital is important. I hate to see people borrow. If they got a 401K now might be the time to use it. If they got investment in their house and they’ve got some $200,000.00 in capital in their house they might be a good time to borrow. Let’s just take an example you need to borrow $300,000.00 to get in the business that have some staying power and to operate this particular franchise opportunity that you decide it was right for you. You’re much better borrowing on your house because your rates are going to be much less for month in paying and you may only have to spend a thousand to $1200.00 a month for that second or third against your house. Whereby if you went to bank and you had the chattel to borrow the money that payment could be two or three times that costs so you want to have your investment money going in, not have a lot of payments going out so try not to borrow, try to use the capital that you have. Maybe you can get some small side of investors to help you some friends, some relatives, that believe in you and they get a little part ownership in the business and you grow the business based on that and have not to pay back a lot of money. Beth Haselhorst: Is that something should you look into how much you are able to invest even before you start looking at franchises? Is the franchise you are looking at got to want to know a lot about your finances? Dick Rennick: Absolutely. You’re going to want to know that. That’s a very good question. Absolutely, they should know what there net worth is. Liquid, I’ve got $50,000.00 in cash in the bank and I’ve got $20,000.00 in savings accounts and I’ve got $75,000.00 in liquidity. I’ve got another $75,000.00 and I put my hands on pretty easy and I’m not going to have to pay anything back so there are no going in. They’ve got a $150,000.00. They shouldn’t be looking at franchises that cost to have a Million dollars or three quarters to Million to build out. You don’t want to buy a place that you’re going to have to buy a piece of ground. You’re going to have to build a big store on it or a big restaurant of some kind. That’s not going to be for you, you’re going to have to buy something that’s much cheaper. Beth Haselhorst: Right. Well, thank you very much and thanks for joining us today. Look for other segments on franchising in small business from Dick here on SBTV.com. You can also learn more about Dick Rennick and its company by going to www.TeamRennick.com. This is SBTV.com where small business is our only business.

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Learn About Franchise Fees

Beth Haselhorst: Franchise has represented some of the biggest names in US business today and if you’re an entrepreneur interested in buying your own franchise you maybe wondering how much you’ll have to spend. Our guest today has the answers. Franchise expert Dick Rennick is an award winning founder of a 360 unit franchise system and former Chairman of the International Franchise Association. Dick is recognized as one of the leading experts in franchising. Welcome to SBTV.com, Dick.

Dick Rennick: Thank you.

Beth Haselhorst: Okay so let’s talk about the initial franchise fees. I know they can range from a few thousand dollars to more than a million. Is there an average initial franchise fee?

Dick Rennick: Yeah, the average initial franchise fee runs between $20,000.00 and $40,000.00. I would say probably 80% of your franchise fees run on that row.

Beth Haselhorst: Okay what about total initial investment that you might have to put in including all the factors that go into it.

Dick Rennick: Yeah, let’s just say that you bought a fast food franchise and the build-up might be a $175,000.00 to build up the stores. So on top of buying the rights to that franchise to be awarded to you, you might spend let’s just take $30,000.00 with your license fee. So you spend that $30,000.00. You’ve got to have a $175,000.00 to build up the store. You’ve got to have some of the money for advertising and promotions so that might be another $50,000.00.

So you maybe looking at $253,000.00 investment just to get the store open. Now you need some staying power. You need some money behind you that keeps this store open while you build the same structure.

Beth Haselhorst: It sounds like a lot of money so what can some potential investors, how can they raise the capital?

Dick Rennick: Perfect, great question. It is a lot of money that depends on the business. If your fast food or if your a service-based business of course the cost are going to be much different but when you have to do a build up of the store or a build up of something that people are going to walk into that can be costly.

So if you’re going to go to a mobile or a home based business cost are going to be less. But the entire costs are dependent upon what you choose and getting the capital is important. I hate to see people borrow. If they got a 401K now might be the time to use it. If they got investment in their house and they’ve got some $200,000.00 in capital in their house they might be a good time to borrow.

Let’s just take an example you need to borrow $300,000.00 to get in the business that have some staying power and to operate this particular franchise opportunity that you decide it was right for you. You’re much better borrowing on your house because your rates are going to be much less for month in paying and you may only have to spend a thousand to $1200.00 a month for that second or third against your house.

Whereby if you went to bank and you had the chattel to borrow the money that payment could be two or three times that costs so you want to have your investment money going in, not have a lot of payments going out so try not to borrow, try to use the capital that you have. Maybe you can get some small side of investors to help you some friends, some relatives, that believe in you and they get a little part ownership in the business and you grow the business based on that and have not to pay back a lot of money.

Beth Haselhorst: Is that something should you look into how much you are able to invest even before you start looking at franchises? Is the franchise you are looking at got to want to know a lot about your finances?

Dick Rennick: Absolutely. You’re going to want to know that. That’s a very good question. Absolutely, they should know what there net worth is. Liquid, I’ve got $50,000.00 in cash in the bank and I’ve got $20,000.00 in savings accounts and I’ve got $75,000.00 in liquidity. I’ve got another $75,000.00 and I put my hands on pretty easy and I’m not going to have to pay anything back so there are no going in. They’ve got a $150,000.00. They shouldn’t be looking at franchises that cost to have a Million dollars or three quarters to Million to build out.

You don’t want to buy a place that you’re going to have to buy a piece of ground. You’re going to have to build a big store on it or a big restaurant of some kind. That’s not going to be for you, you’re going to have to buy something that’s much cheaper.

Beth Haselhorst: Right. Well, thank you very much and thanks for joining us today. Look for other segments on franchising in small business from Dick here on SBTV.com.

You can also learn more about Dick Rennick and its company by going to www.TeamRennick.com. This is SBTV.com where small business is our only business.

Transcription by: Scribe4you Transcription Services