How much capital is required for a franchise?

EltonJohnFan

Good evening everyone, hope you're all safe and well?

I've been researching some business ideas for the future and I'm seriously giving thought to opening a franchise of some sort. I understand that McDonalds, Burker King, Subway etc are always looking for franchisees and I'd really appreciate if you could tell me some more about this? I'm particularly interested in how much capital I'd need up front for this sort of thing and my father has already told me that he's willing to help me out a little on the business side of things as he has many years of running his own business. I've estimated that I could save around £100,000 within five to seven years as I live very frugally and don't really have any expenses in my life other than the basics. I'm a very badly disabled man and I find it extremely difficult to find mainstream employment as many employers are very reluctant to give me a chance of work, even though I'm highly qualified and an extremely loyal person who can offer so much. I don't want to spend my life languishing on benefits or worrying about if I'm in employment or not so I'd rather work for myself if that's at all possible. Thank you very much for your help

redcard

If you have a spare £20K each year then you don't really need to work!

It's extremely difficult to make money in franchising, unless you're the one selling them. For the first couple of years you'd probably have to be onsite 7 days a week to make a decent wage.

I really think there's way better options for you than a franchise, and I'm sure plenty of people will be along with ideas

Cautious_Investor_3

redcard wrote: »

It's extremely difficult to make money in franchising, unless you're the one selling them. For the first couple of years you'd probably have to be onsite 7 days a week to make a decent wage.

Sounds like any new business! In fact I wouldn't expect the decent wage!

Seriously though the right franchise can be excellent, I know someone who used to own some Wimpey 'restaurants', he made a small fortune on them.

There are also a large number of franchises you could frankly replicate yourself and with far lower start up costs.

Buying a franchise is exactly the same as starting your own business, it has the same ups and downs, and you will face many of the same issues.

Take a look at this exhibition:

http://www.franchiseinfo.co.uk/

I went to a similar one at the NEC some years ago (I had a trade stand offering commercial finance), my eyes were opened to the sorts of firms who offer excellent franchises and those that don't.

One last thought, why wait to start a business? Go for it now on your own, you may need less start up capital and the sooner you start the sooner you'll bank your first mil!

Good luck

The Cautious Investor

Cautious_Investor_3

redcard wrote: »

If you have a spare £20K each year then you don't really need to work!

Maybe he has the £20k beacuse he works :rotfl:

Hungerdunger

I don't think it's possible to give you an answer, as costs will vary considerably depending on which Franchise you go for.

My wife and I are former franchisees of a High Street operation. IIRC the Franchise Fee was in the region of £10k, but the start-up costs were well over £150k as we had to fit out and equip the shop and buy in the opening stock. You will probably need to contact each prospective Franchisor to find out how their set-up works.

The obvious advantage of franchising is that you have an established name from Day 1, but I can tell you that we both had to work extremely hard throughout our time. One disadvantage is that if your Franchisor goes out of favour with the public and your sales decline, you are stuck with that and won't be able to diversify or modify your offer as you would be able to if you were running your own business.

whitson

You might find that a lettings franchise is less effort than fast food. Lettings is basically getting landlords and tenants together. I've recently been looking into a company called SureLet Franchise.

There's loads of info on their website about the lettings market. I can't post a link as I don't often post here. A quick google should give you their website (if you cant guess it)

I'm not a surelet employee and neither am I one of their franchisees. Ive just been looking into options just in case.

purch

McDonalds, Burker King, Subway etc

Subway maybe, not McDonalds or Burger King.

donkingkong

This might be useful. Start saving!

http://www.mcdonalds.co.uk/about-us/franchise/overview.shtml wrote:

As a guide, the cost of a restaurant typically ranges from £125,000 to £325,000. + whatever % they take from gross sales on a monthly basis.

http://www.kfc.co.uk/about-kfc/franchise/ wrote:

A minimum of £5MM (minimum £2MM own money) and with access to additional funding to suit growth requirements.

Initial new licence fee - US $43,600

Franchise royalty fee - 6% of sales, paid monthly

Advertising contribution - 5% of sales paid into a co-operative mainly used for National TV & 0.5% of sales on local marketing

The cost of fitting and equipping a building to KFC standards can be over £500,000 for a quality Drive Thru unit. This is IN ADDITION to the lease/freehold costs of the land/building. In addition to the above estimated costs, further working capital would be required to purchase stock, cover training costs and provide for initial outgoings such as wages, utility deposits, insurance premiums etc.

http://www.burgerking.co.uk/f wrote:

Depending on the type of restaurant and the investment model, the total amount invested by a franchisee can be between £250k and £800k (not including the cost of land in a free standing location).

Currently when a franchise agreement is concluded a single fee of US$40 000 per restaurant is payable. Additionally, the franchisee pays 5% of total sales (plus VAT where applicable) in the form of a royalty contribution, and an additional 5% of total sales (plus VAT where applicable) as a contribution to the national marketing fund.

http://uk.webuy.com/franchising/_(CEX) wrote:

£60,000+ capital plus the ability to raise the balance (total investment of £200,000 to £250,000 required, of which most will go towards stock and shop fitting).