Purchasing a franchise allows you to sell products or services from a company that has enough name recognition to guarantee customers. Before you jump into the deal, however, you should consider the costs involved and decide if this type of business is right for you.

Opening Fee

Buying a franchise may require an initial investment of at least several thousand dollars (established, international companies can require fees in the hundreds of thousands).  

Rental Fees

You may not be able to choose your preferred location for the opening of the store and may be limited to a particular area selected by the company. Companies sometimes evaluate and propose a few locations (sometimes only one or two), primarily to ensure that no more than one franchisee will sell in the same territory.

Royalties Fee

Many companies charge a royalty fee based on your gross income.  Others charge a set monthly fee, regardless of your profits (which can be above or below that number).

Design/Model Fee

Companies normally require you maintain a certain “look”, which means you will have to invest in materials, personnel, and sometimes a company-approved designer to imitate everything to the minimum detail.

Inventory

Because your primary goal is to maintain a company standard, you may be required to buy your products from a specific supplier (even if his prices are higher than the norm), keep offering for sale products even if they do not sell, and maintain a set price, not matter the economical status of your community.  

Advertising

A joint advertising fund is sometimes organized, not necessarily to promote your own store, but the company in general. You are expected to put in money into the fund, even if it doesn’t provide you with any immediate benefit. 

Before Investing, Ask Yourself

• Do you have the entire amount required to pay the opening fee?
• If not, can you partner with others who do?
• Will you be applying for financing? Are you sure you qualify for it?
• If the franchise doesn’t make any money in the first few months, how will you support yourself?
• If it doesn’t work out, can you afford to lose the investment?
• Are you qualified? Have you ever owned a business? Do you know how to manage large sums of money? Will you hire an accountant?
• Is there a demand for the type of business you want to open?
• Have you investigated the company? Do you know how much you can expect to make in a year? How much will your expenses amount to? Can you live with the difference?
• Have you consulted with a lawyer?

Finally, inform yourself carefully before making a final decision. If you do decide to invest, do it once you are fully aware of what to expect.