How much to invest?

[Emma]

How much does it cost to invest in a typical national franchise like KFC etc?

[Emma James]

but I have an astronomical figure in my head for the likes of MacD - in the region of 250K. Best thing is to do a quick Google I'd say, there must be some franchising sites out there with Q n A forums which could advise or perhaps a franchising specialist could advise?

Naz may be a useful person to run the question by; http://www.ecademy.com/account.php?id=120141

[Mark]

I wish Naz would turn up here - a good egg and so full of knowledge.

[SME Eurofinance]

I believe KFC franchises range from £100 - £500k dependent on location.

I heard recently of some chap up north who had built up five prime locations over the years and sold them for £17M... yes..... £17M ! That's a big chicken to reward yourself with

[Mat]

I looked into franchises not so long ago, and came up with similar figures to those quoted here. The figures seem very high, but a franchise can take a lot of the legwork out of setting up your business.

[Terry Cartwright]

Originally Posted by SME Eurofinance

I believe KFC franchises range from £100 - £500k dependent on location.

This quote reminded me of a chap I met years ago in Sheffield, prob 1990.
Asian background, yorkshire man through and through.
He solved the KFC franchise fee big time.

Bought and tasted all the products, then invented his own recipes that I tried and they tasted exactly the same.
Name of his business.
Kenya Fried Chicken

The moral of the story is if you have the ability you don't need to pay extortionate amounts for a franchise but can duplicate the business model - without breaking copyright laws of course - and being a little unique do even better.

[Mark]

There are KFC 'clones' all over the UK but I do seem to recall one in Sheffield I visited a few years back. Or was it a pizza place? I remember onions and stuff. I was very... very drunk at the time...

[Dot Design]

Didn't know these franchises were so costly to setup! But I guess your buying a ready made business in terms of a recognised brand and product, I expect choosing the location is the key thing along with getting the right kind of staff.

A fair few 'Subways' have popped up in our city centre in the last couple of years, they seem to have done instantly well, anyone know how much for a Subway' Branch?

I feel abit peckish now!

[whistle ink]

Originally Posted by Terry Cartwright

Kenya Fried Chicken
.

Amazing!

[Prism Hosting]

I looked at the subway franchise and you are looking at paying 100k at least.

[JonDavies]

Originally Posted by Prism Hosting

I looked at the subway franchise and you are looking at paying 100k at least.

And I've seen quite a few anecdotal pieces of evidence that it takes an average of six stores to make a half-decent living!

From what I hear, it is not the franchise cost, rather the equipment leasing that is the major expense.

[GeorgeM]

The investment in a franchise usually relates to the value of the brand. Therefore you can expect to pay more (circa 6 figures) for a McD or KFC franchise because those brands are instantly recognisable and trusted....and therefore in theory the time to money is shorter.

For a less-well know brand you can expect to pay less. But then you, the franchisee, will have to sell the brand harder than an established one.

So yes you can copy an established brand idea (subject to legal restrictions) but ofcourse that doesn't mean the same number of customers will instantly flock to you.

[businessinline1]

It might be little expensive.Better to have talk with the concerned person.It hink it's better idea to go with KFC.

[NikkiPilkington]

The thing that a lot of people forget when buying a franchise (and here I'm talking about a lower cost franchise such as City local, WSI, etc) is that just because you've paid for a franchise doesn't guarantee success.

You still need to promote your business, find customers and provide good customer service, just as you would if you had started your won business. You'll still have to network, chase accounts, make sure invoicing is done on time, etc etc etc. Paying for a franchise doesn't cut out the hard work.

I sounds as if I'm anti franchise, but I'm not at all - I ca see how it is a good idea and can work well for some people. However, I do think that in a lot of cases the franchise is mis-sold as a 'ready made business' when in fact it isn't.

Obviously in the case of McD, KFC etc you have the value of the brand and everything, but with smaller franchises (Chips Away, Kleeneze, Waterless Detailers, etc) there's still a lot of donkey work to be done.

I was once asked if I'd consider franchising NikkiPilkington.com - once I'd stopped laughing and looked seriously at the proposal, I realised that what I wanted to sell and what people thought they were buying a lot of the time were two different things.

[Paul Norman]

Franchises have the potential to be very good as a business model. Or not. Each needs looking at on its own merits.

Before investing, make sure:

1. You believe in the product - a lot.
2. You understand the business model completely.
3. You believe in the revenue projections, even on a gloomy day.
4. You have understood the small print, the exit terms, the hidden costs, the on going financial commitment.

Like Nikki, I am not anti-franchising, just cautious as I meet lots of people who are disappointed. I also meet people who are pleased, but you do want to be certain which group you will become a member of!

[UrsulaBarzey]

From the 2008 NatWest/British Franchise Association Survey:

The average total start-up fee for a franchise operation (from a series of initial fees levied by franchistors) is £64,900.

Hotel & Catering and Store Retailing franchise units incur the highest start-up costs: £125K and £160 respectively. The entry costs are high reflecting the nature of each industry; the cost of equipping and fitting out premises makes up the bulk of the costs, along with the cost of stocks for store retailers.


Annual turnover for franchise units in these two sectors is:

Hotel & Catering

Less than £50K: 28%
£50K - £249K: 27%
£250K - £499K: 18%
Over £500K : 27%

Average for this sector is £380,000


Store Retailing

Less than £50K: 12%
£50K - £249K: 24%
£250K - £499K: 18%
Over £500K : 47%

Average for this sector is: £588,000

[Mark]

£64,000? Do banks typically loan that sort of money for potential franchisees?

[UrsulaBarzey]

The amount of money that a bank will lend you depends on the franchise system and your personal suituation. For a new franchise system, banks will lend about 50% of start-up cost. For a more established system, banks will lend up to 70% of the start-up cost. To get funding at either level, you will need to leverage some sort of asset -- (i.e. your property, etc). You will also need to have some liquid cash of your own.

If you don't have the liquid cash needed, but you have a lot of equity in your property or have a sizeable pension fund, you may be able to get the money needed to invest in a franchise business through an offset. For this, you'll need to speak with an IFA. If you'd like to explore this route, can recommend someone who has a lot of experience in this area. Just send me a private message.

[Virtual PA Star]

Originally Posted by NikkiPilkington

The thing that a lot of people forget when buying a franchise (and here I'm talking about a lower cost franchise such as City local, WSI, etc) is that just because you've paid for a franchise doesn't guarantee success.

You still need to promote your business, find customers and provide good customer service, just as you would if you had started your won business. You'll still have to network, chase accounts, make sure invoicing is done on time, etc etc etc. Paying for a franchise doesn't cut out the hard work.

I sounds as if I'm anti franchise, but I'm not at all - I ca see how it is a good idea and can work well for some people. However, I do think that in a lot of cases the franchise is mis-sold as a 'ready made business' when in fact it isn't.

Obviously in the case of McD, KFC etc you have the value of the brand and everything, but with smaller franchises (Chips Away, Kleeneze, Waterless Detailers, etc) there's still a lot of donkey work to be done.

I was once asked if I'd consider franchising NikkiPilkington.com - once I'd stopped laughing and looked seriously at the proposal, I realised that what I wanted to sell and what people thought they were buying a lot of the time were two different things.

agree whole heartedly..... went to see someone about setting up a franchise and decided to set myself up as a competitor instead... there were holes and mistakes and they wanted a huge amount of money for not much at all really...(they offered to do my invoices and discount on some memberships i wouldn't need!!)

I just thought... I can do so much better than that ... so I'm giving it a go for no investment at all really

[Paul Jennings]

I know someone who had a Maccy Ds Franchise and the bottom fell out of it after supersize me, he now has 2 subways, I wouldn't touch them with a barge pole.
MDs takes around 15 years to make your money back and you have to go on training for 10 months - so you're not earning for that time and subway takes a little less time to make your money back at 10 years!!

Paul

[GeorgeM]

The point Nikki makes is a very good one. No franchise is a 'ready made business'.

They are in fact 'ready made opportunities' that someone can invest in and build a revenue stream.

For some people that is very attractive, because it means they can start in business with a 'proven' model and a set of straightforward products and services to sell - sounds good. Buying a franchise is buying into that business model or method - but you still have to make it into a viable revenue-earning business - and that's the hard part !

In making your decision to buy or not you should work out whether, over the franchise term - often 5 years - you can recover your initial investment and make a profit.

If your business plan shows that you can't, then there's little point in buying that particular franchise. And you should be able to arrive at that calculation before handing over any money.

[AaronPollock]

Location's everything. I worked in a small market town here (N Ireland) up until a year ago. A real shortage of places to buy lunch except for a local (very busy and uncomfortable) bakery. A sandwich shop opened and was instantly hiving with customers. A few months later, Subway arrived. Same idea.

Franchise or not, if the product and market are poorly matched, you're probably dead before starting.

I wish I'd had access to the capital to open a sandwich shop there when I first noticed it. Then again, the arrival of Subway may have killed the smaller sandwich shop by now.

[AndyMyers]

Originally Posted by Mark

There are KFC 'clones' all over the UK but I do seem to recall one in Sheffield I visited a few years back. Or was it a pizza place? I remember onions and stuff. I was very... very drunk at the time...

There are plenty in Leeds as well - 'Kirkstall Fried Chicken' being a notable example! Funny how Macdonalds and Burger King don't seem to get cloned to the same extent

RE: the OP's original question, it is not always necessary to invest a considerable amount of money in a franchise. It depends on the amount you can afford - the likes of Macdonalds etc who are already very successful.