How to Estimate the Cost of Opening a Brand New Franchise?

How to Estimate the Cost of Opening a Brand New Franchise?

Every single franchise UK has its own financial requirements. The cost associated with starting a new franchising business varies since it depends on the type of franchise you wish to run. One of the most common costs of franchising is paying the franchise fee but there are several types of expenses, which are directly associated with being a franchisee. Several new franchises UK undergoes different expenses including:

1. The cost of furniture
2. Equipment cost
3. Salaries and wages for employees
4. Contractor fees
5. Inventory
6. Signage

The costs mentioned in the aforementioned list can vary depending on the type of franchise you wish to operate. In this post, we’re listing the different costs associated with opening a new franchise, so let’s begin!

1.   The Franchise Fee

A franchise fee is one of the most basic costs associated with opening a new franchise business. For example, if you are interested to be a part of the lucrative coffee franchises business, you will be required to pay the franchise fee set by the franchisor. The estimated fee can cost you anywhere from £5000 to £20,000 the fee can be more if your franchisor is a major leading brand.

2.   The Working Capital

Working capital is any financial resource or cash that is required to run the day-to-day operations of the business. The amount of working capital depends on the franchise type. Low cost franchises might not cost you a fortune to run smoothly but some franchises require extensive training and a large amount of working capital to begin with. The amount you need in working capital is generally provided by the franchisor. It’s recommended that you have enough working capital to last a particular length of time, for many franchises UK you will need to have a working capital lasting two to three years on average.

Also: Why franchises should write a business plan

3.   Accounting and Legal Fees

To understand the cost estimate of opening franchise, services of a qualified franchise attorney will come in handy. An attorney will help you understand the legal documents like the English Contract Agreement and other paperwork and costs related to running full or part time franchises.

4.   Cost of Supplies

Whether you plan to have a franchise store or a home based franchise, you will need different supplies to run your business. If you’re planning on being a part of fast food franchises UK then you’ll need cookware, ovens, knives, plastic takeaway boxes, cups and glasses. You have to calculate all your expenses to get a clear final estimate of your cost. The franchisor provides a cost estimation based on what you’ll need to open a franchise.

5.   Cost of Inventory

Whether you’re buying a retail franchise or planning to invest in top van based franchises you will need to stock up on inventory. Since the business operations of each franchise are different, you will need to manage the inventory accordingly. You will need inventory at an estimated cost of £10,000 or more to be on the safe side during the initial months of your business.

To find out more about becoming a franchisee, or for information on how you can advertise your franchise, get in touch with the Quality Franchise Association.