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What does a franchise cost?

There is an initial franchise fee, followed by a commission usually calculated as a percentage of sales.

Franchise fee

The amount of the initial franchise fee can be as low as a few hundred pounds or as high as hundreds of thousands of dollars, depending on the type of franchise. The amount will depend on how well established the franchisor is and what you are getting. If you are joining a group like Body Shop, for example, they will be identifying premises, negotiating leases, fitting out, stocking up, as well as training you to run the operation. The fee is therefore going to be tens of thousands of pounds. A franchise for providing domestic cleaning services, on the other hand, will involve little capital expenditure and therefore should be a lot cheaper at a few thousand dollars.

Ongoing charges

Franchisors normally charge for their ongoing support by way of taking a commission oh sales. The percentage will vary from case to case. The franchisor will often also levy a charge for out-of-pocket expenses such as advertising. Items such as stationery and uniforms will also have to be paid for, where applicable, usually with a mark-up for the franchisor.

Types of franchises

The best way to find out if there is a franchise that is potentially suitable for you is to get one of the franchise magazines. There is a wide range of franchises available including:

Professional services

- Expenses analysis for businesses (analysing gas, electricity, telephone, etc., for potential savings).

- Dating agencies.

- Employment agencies.

- Travel agencies.

- Business transfer agencies.

Delivery services

- Parcels, pet foods.

Retail

- Shops.

- Supplying shops with greetings cards, batteries, children's rides slot machines.

Cleaning

- Domestic cleaning services, contract cleaning

Repairs

- Windscreens, car body paint chips.

What are the disadvantages of a franchise?

You probably decided on a franchise to overcome lack of knowledge or confidence in the early days.

The main disadvantages are in the longer term:

As time passes, franchisees become fully acquainted with the business and begin to feel that they do not need the franchisor.

The lack of flexibility.

The feeling of being like an employee rather than an owner. If you want to sell the business, there is usually a fee to be paid to the franchisor, who also has to approve your purchaser.