Proper planning calls for an understanding of the costs of starting a business. And unlike a conventional business startup where some costs are undefined, a franchise opportunity breaks everything down. For instance, if you opt for an Image One Commercial Cleaning Franchise, you can go over the chain’s complete breakdown of costs.
Full disclosure: total costs vary wildly due to a multitude of factors. As a result, a ballpark figure would suffice to act as a guideline. Case in point, an Image One franchise costs $72,700 and $217,000. It may cost more to start a different franchise.
Let’s unpack the expenses of starting a standard commercial cleaning franchise so you get an idea of what I mean. Ready. Set. Go!
A franchise fee is the initial upfront payment you make to a franchisor. In turn, the franchisor grants you the right to use its brand, services, or intellectual property.
According to the Federal Trade Commission’s rules, the fee should be at least $500. This fee varies from one company to another. Generally, you can enjoy some perks by paying such a fee, such as brand recognition (by your association with the franchisor). Still, you can take advantage of already-established systems. Typically, a franchisor will likely command higher fees if they offer comprehensive support.
But, franchise fees do not equate to the initial support you receive from a franchisor. Instead, it’s akin to a membership fee that allows you to be part of the franchise system as detailed by your agreement. However, company policies vary, with some claiming that the fee covers the initial training, while others require the franchisee to cover such costs.
Essentially, you pay for rights to valuable assets that may facilitate your business. Some of the factors determining the franchise fee you might end up paying include:
- Location- expect to pay more if you plan to open a franchise in mid-town New York than in a smaller city. For instance, Image One charges between $29,750-$119,700 as franchise fees.
- Competition- you are likely to pay more if there are few direct competitors in your selected market.
- Duration of the contract- long-term contracts attract higher fees.
Most firms provide initial training to clue you in on the business you intend to start. If you have to travel to a regional office for a week-long training session, you would have to cater to food, transport, learning resources, and other related costs. Training programs may also include classroom sessions and on-site training.
Some commercial cleaning franchises use proprietary cleaning supplies. To differentiate their services and for their franchisees to stand out, franchisors may include additional costs for supplies and equipment in an agreement. Case in point, Image One’s supplies run between $3,500-10,000$.
Most commercial cleaning franchises include a non-negotiable royalty fee as part of the arrangement. Typically, the franchisor may require you to pay a specific percentage of your gross or net revenue monthly as royalty- your ongoing benefit of using a franchisor’s assets. This can be anywhere between 3% and 10% or more, depending on the agreement.
You may also have to part with a proportion of your gross earnings to cater for marketing initiatives, administration expenses, consultations, and ongoing training, among other costs.
Some franchisors opt for a flat-fee basis for monthly royalties. Others may charge lower percentages or escalate their percentages to match the level of sales at the time.
The franchise disclosure document (FDD) typically details the frequency and payment you need to make. Consider reviewing it before finalizing an agreement with a franchisor. Better still, getting a legal opinion won’t hurt. After all, you would be putting your money on the line.
A franchisor has to pay for other costs before you can commence operations, just as you would if you had to start a business independently. These include insurance, legal fees, and office equipment. Mostly, your initial investment may cover these costs. But in some cases, you may have to take on such expenses.
Ultimately, the importance of perusing a firm’s FDD cannot be overstated. Usually, the FDD details these costs and other aspects you need to consider. That way, you can determine whether a particular franchisor is a right fit or if such a path is one you should take. If you need to learn more about the cost of an Image One franchise, its support system, market strategies, and other perks, check out the firm’s site or contact them directly.