A snack or fast-food franchise remains a profitable option for aspiring business owners this year, yet with the related benefits come at a hefty price tag.
Those who have been thinking about joining a well-known brand should be prepared to invest at least $116,600. This initial investment will allow you to have your own Subway store. Take note that having capital is only the first step. You should be ready to pay 8% of gross sales, which would serve as royalty fees on top of a $15,000 franchising fee. It makes sense to consider other low-cost alternatives, such as cookie or pretzel franchise opportunities.
Established yet Expensive
If you think that a Subway franchise is already costly, then buying a McDonald’s franchise might make some people question the viability of being a franchisee. It would cost you at least $955,000 in unencumbered assets to own a store. Most people buy an existing store either from an existing franchisee or from McDonald’s since this only entails a 25% down payment instead of 40% if they buy a new store.
Some brands even require prospective franchisees to meet a specific requirement on liquidity and net worth. For instance, hopeful Pinkberry franchisees must first have a net value of $400,000 and $200,000 of cash liquidity.
Given the steep price of owning a well-known franchise, first-time business owners should just focus on smaller and affordable brands. Some of these include buying a pretzel store, and running one can be a good choice due to stable demand.
Sales of pretzels in the U.S. reach more than $550 million every year. Most of these are sold in Pennsylvania where the person eats an average of around 12 pounds of pretzels per year, compared to just two pounds for the average American elsewhere. It’s safe to say that the state is the pretzel capital in the country. Whether or not you decide to run a pretzel store, negotiating a franchise agreement will be important.
Negotiating a Deal
Otherwise known as an adhesion contract, a franchising deal between franchisors and their members allows the former to enter into a binding agreement without making changes. Franchisors often have the upper hand in these contracts, but there are times when they can make some amendments.
These adjustments could stem from legal counsel from either their own or the franchisee. Hence, hiring a competent lawyer is essential to franchisees. Some of the changes that can be enforced in an adhesion deal include the provision of more resources from the franchisor, better marketing, and advertising support, and financial assistance for your business launch. It could also be specific changes to franchising fees or royalty expenses.
When choosing a franchise, keep in mind that paying a huge upfront fee doesn’t always guarantee success. Banking on a brand’s strong market presence would not be enough to sustain your business. You should also be aware that most new companies fail to exist beyond their first year, so choose a brand that you trust.