One of the most overwhelming aspects of owning a franchise is the initial investment you need to make. This consists of professional fees, an initial franchise fee, royalty fees and employee and inventory expenses, among others. However, with a little research, the whole process doesn’t have to seem so complicated. Especially if you are looking into the cost of a spray tan franchise, you can rest easy knowing you will probably pay less than you would for a hotel or restaurant franchise. Naturally, expenses still exist, and these are some to keep in mind.
Before investing in a spray tan franchise and signing an agreement, you will probably want to hire an accountant to help with budgeting. Of course, the accountant’s fee will be one initial expense, but she can be well worth the money. Other worthwhile professional fees may include an attorney to review the franchise contract and, if you choose to present a business plan to potential lenders, a business plan writer to help you compile a document.
Initial Franchise Fee and Royalties
The franchise fee is a one-time payment you make to the franchisor to benefit from its operating system, brand and continued support. The cost of a spray tan franchise usually involves an initial fee of approximately $20,000, but this can vary depending on the particular franchise you choose. The royalty fee is what you have to pay to the franchisor, normally weekly or monthly, to continue using its brand. It is often defined as a percentage of sales, and the average range is 4-8%. Though royalties are ongoing, it’s important to remember that you will pay them from the very beginning of your business.
One of the biggest questions to consider before investing in a spray tan franchise is location. This includes the costs of renting a building and readying it for opening day. For example, if you want to locate your spray tan franchise near the beach, you will likely pay higher rent. It is also important to calculate the initial and ongoing expenses of utilities. A final consideration is the costs of preparing the interior and exterior space, including paint jobs, furnishings and exterior landscaping, for the grand opening. These numbers may seem difficult to predict, but proper planning and research can leave you with nothing to fear.
Employees and Inventory
You should also budget for initial expenses involving your employees and inventory. What is the cost of training your employees? Will you need to buy uniforms for them? As for supplies, how much money do you need to set up the initial inventory of a spray tan business? One benefit when contemplating the cost of a spray tan franchise is that the franchiser can offer pretty accurate estimates of employee and inventory expenses, and of some of the other costs discussed above.
Finally, it’s important to keep in mind other miscellaneous fees. If you choose to partially finance your franchise with loans, remember to budget for interest. Advertising for your new business is another expense, as is purchasing a business license and small business insurance. Above all, remember to put some money aside for unforeseen expenses, just as many people do in their private budgets.
You Are Not Alone
This list of expenses may seem overwhelming, but the more you know, the more power you have. Also remember that you don’t have to be alone in your quest cover the cost of a spray tan franchise. Whether you choose to work with lenders or not, franchisers often help with initial expenses. Additionally, a popular source of start-up capital is family and friends. Owning a franchise has worked for many people, and it can work for you. Budgeting while keeping this list of costs in mind can be one of your keys to success.