This post is part of a 40-Part Series.
Question 5: “What was your total investment, including any hidden or unexpected costs?”
Sometimes, you need to go beyond what you see in black and white.
Although the total investment of the franchise business opportunity is disclosed in the FDD-in black and white, it’s a good idea to get some information from other sources, to back it up.
Back to what you’re about to do: buy a franchise.
The total up-front investment in a franchise consists of several things, including one thing that most people forget to include.
Some of them are:
- Franchise Fee
- Travel (For training at headquarters)
- Leasehold improvements
- Inventory costs
- Equipment, furniture
- Technology set-up
- Grand Opening costs
- Local permits, etc.
- Working capital
There may be even more things that you’ll need to spend money on, before you can even open for business.
One great thing about the business model of franchising is that you have the ability to find out almost everything about the opportunity–before you invest in it. In all the years that I’ve been involved in franchising, I can’t remember one time in which a franchisor didn’t disclose everything regarding the total investment. Not one. But…
I still want you to verify that all the costs listed in the FDD and the franchise brochure are accurate. There’s only one way to do that, and that’s by including the Question 5 in your due diligence calls that you’ll be making to the franchisees.
That way, there won’t be any surprises.