Best franchise opportunity costs
Could a franchise be a good way of starting your business? The costs of franchises vary greatly - here we look at the prices of different types of franchise opportunities
The cost of setting up as a franchisee varies widely. What type is the best franchise opportunity for you?
According to the British Franchise Association, the average cost of setting up a franchise is £42,200 (a figure that includes fees, working capital, equipment and fittings, stock and materials). Often, the best franchise opportunity will require a significant investment.
Businesses run from home, or operated from a single van, are cheaper than those requiring special premises, prime high street sites, technical equipment or a fleet of delivery vehicles. For example:
Oscar Pet Foods
This is a home-based pet-food delivery franchise, so there is no outlay for premises. Franchise fee for a 10,000 household area is £9,400 which includes training, logos, signwriting for the van, etc. Packages for areas with higher numbers of households cost more.Buying or leasing a van is also part of the package although this can be any size or model. You need another £3,000 working capital and insurance for sickness or accidents, from £12.50 monthly, is mandatory.
Total outlay: approximately £11,000.
This cleaning franchise, where you manage a team of maids, has a £7,800 franchise fee. That covers £3,500 for logos, business knowledge, format details; £4,300 for a local market survey, accommodation while training, initial mailshots and advertising, stationery and uniforms. You also need £10,000 working capital for staff recruitment and training, ongoing advertising and £1,000 each for setting up three vans – leasing deposit, cleaning materials and equipment. You also need independent financial support in year one.
Total outlay: approximately £19,000
To start up a new Kall Kwik printing outlet costs £4,500 for the best franchise opportunity (although it is more common to buy an existing franchise, which would cost around £150,000). The best franchise opportunity package – including initial and on-going training, market surveys, property search and lease negotiation, design and shopfitting specifications for your centre, etc – adds £14,250. But the big cost is £38,250 for specialist equipment like the press, camera, platemaker and guillotine, as well as leased digital print equipment. Then there is £8,000 for shopfittings, £6,000 for initial stock and stationery, and £7,000 for the marketing launch, which includes direct mail and telemarketing. Legal and accountancy fees are £5,000. Unusually for a UK franchise, the three-week training is in the US so you pay £1,500 for travel and accommodation there. Staff recruitment, vehicle deposit and pre-opening expenses add another £2,500 and VAT adds £15,000. You also need about £33,000 working capital.
Total outlay: £134,000.
New McDonald's franchisees have to buy an existing restaurant. Cost depends on profitability, regardless of location, and varies from around £150,000-£1 million. There is also a franchise fee of £30,000, a security deposit of £10,000 (usually returned after ten years), £10,000 for stock and £10,000 working capital. One unusual additional requirement is that you have to fund yourself throughout nine months full-time training. You are expected to come up with at least 25% of the total money yourself. But applicants with at least £30,000 ready cash can use it to get started in an outlet leased from McDonald's, and have three years to come up with the 25% startup funds.
Total outlay: depends on profitability of outlet, but for one valued at £150,000 you pay about £200,000.