(SF5) Franchise Series 5 – Assessing Your Financial Situation
Before you start the process to franchise ownership, the first thing you want to do is take a look at your finances. For some people this can be sombering. For others you may find that you are in a better position than you originally thought. Some things to remember here are do not cut corners and take this process seriously. One of the biggest reasons that new franchises fail to procure sufficient funds for the entire process.
Evaluating Your Franchise Finances
When you have completed the self-evaluation you will have a better understanding of how much you can invest and what your limits are as a franchisee. This will help you to better determine what the best choice for your franchise is. Along with this you will also want to look at the investment requirements from the franchisor and determine how much you are willing to risk.
You may also want to look at franchises that will help you to find the loans and various franchising you may need to get the franchise off the ground. This may include aspects such as equipment financing or leasing. Keep in mind that just because you can obtain financing does not mean that this is the smartest thing for you to do. You will still have to pay back the loan and if you do not have the funds for this then you can find yourself in a lot of financial trouble down the line that may not go away even if you step away from the franchise.
A good idea to help with procuring appropriate finances for the entirety of the startup process is to make a list of financial issues and surprises that cost a little more a little past your current financial capabilities and discuss these situations with your franchisor. In many cases, the franchisor can help you analyze your finances to find out how you can get there or locate mistakes that may have been made in your calculations.
The Cost of the Franchise
There is no denying that opening any business will require a lot of money. Whether you start a business all on your own or buy a franchise you will find that there are several costs that will come into play during startup. You want to make sure you have enough capital to be able to get through the opening and cash draining period.
One of the biggest benefits of choosing a franchise is that it lowers the time and costs that come with a learning curve when starting your own business. The franchisor will have much of the work already done for you. This includes tasks such as finding the right vendors, creating decor packages, researching and finding the right equipment options, and much more. In the financial disclosure document you will see a list of start up costs as well as what your initial investment will be. 
Counting the Costs
The cost for start up will vary drastically depending on the company and market you select. This can range from around $20,000 to several million dollars. Keep in mind that when you include all the costs for startup you will generally be looking at a price tag around $80,000 minimally. There are many things that can impact this such as whether you will lease or own the office space,
You will want to look at the liquid capital investment required by the company, which means cash. It is common for a franchisor to want a franchisee to have at least 35 to 50 percent liquid capital. This is to ensure that you not only have enough capital to start, but to get through the first few months.