13/03/2019
Consider the Capital Required to Invest
Starting your franchised business is similar to starting a small business; there are initial costs required to get it off the ground. Franchise opportunity investment levels can range from Rs.100,000 to upwards of Rs.1 crore or more.
Taking inventory of your capital and knowing your investment budget gives you a better sense of what opportunities are available to you. Although you may already have an idea of what industry you want to franchise in, you may not be aware of the capital required to support the concept.
In franchising, two significant expenses to consider are the franchise fee and ongoing cost. Keep in mind; you also need the capital to cover equipment, supplies, employee salaries and real estate (if applicable). Most franchise websites list the total investment costs to get started.
Measuring Up to Franchisor Requirements
Franchising isn’t as simple as a transaction though. You have to meet the franchisor’s requirements – including net worth, liquid assets, the ability to finance up to a certain amount, and sometimes industry experience – to qualify as a franchisee; the financial requirements we mentioned are separate from the amount of cash necessary to invest.
The object is to make sure the potential franchisee isn’t just scraping together every penny to invest but will have the financial resources to get the doors open and survive the lean times while the franchise is growing.
Franchisors want their franchisees to succeed, and insufficient capital is one of the top reasons new businesses fail. Financial requirements like net worth increase the chances of success.
