What’s The Minimum Personal Investment A Franchisee Is Required To Put Into A Franchise?

You would be looking at 30 per cent of the total set-up costs.

It’s worth explaining the terms above as there is often confusion. The franchise fee is the amount the franchisee pays to ‘get into the game’. It covers the grant of the rights to use the name, trademark, system, software and so on that are the subject of the franchise. Often it also covers initial training and various items of equipment.

From the franchisor’s point of view, it should also cover the costs of recruiting the franchisee, including any payments made to third parties for business planning and managing the recruitment process, and some amortisation of the other costs incurred in setting up the franchise in the first place.

Total set-up costs could, however, be a lot more, especially if premises are involved that have to be renovated and fitted out or vehicles have to be signwritten and equipped. Then there’s the cost of recruiting, training and paying staff before the unit opens and of buying stock and storing it until it’s sold.

A good franchisor will help you with all the figures, while a good business plan will both tell you how much you need to borrow and make it easier for you to borrow it.