How Much Financing Does Your Franchise Need?

Starting a new franchise can be expensive. However, not all franchises cost the same to start and operate. What goes into determining the cost of owning and operating a franchise? Some of the most common factors are below.

Down Payment

The first big expense that new franchise owners will need to pay is the downpayment. This fee varies based on what franchise you choose to operate. However, you can reduce the amount of money you need to pay out-of-pocket for the downpayment by taking out a loan. If it is your first time buying a franchise, then you may want to check out the franchises approved by the Small Business Association. If a franchise is covered by the SBA, you may be qualified for special loans.

Supplies and Inventory

When you buy into a franchise, you are buying into the name. However, you don’t get all the supplies and inventory for free, so make sure to factor these fees into your budget. These fees will vary based on what type of business you buy into. Food-based businesses will require kitchen appliances, clothing stores will need racks and shelves, and so on.


No matter what kind of business you run, you will need to get business insurance. There is more than one type of business insurance to choose from. According to Entrepreneur, there are seven types of insurance that businesses should have to protect themselves. These include the following:

  1. Professional liability insurance
  2. Property insurance
  3. Worker’s compensation insurance
  4. Home-based business insurance
  5. Product liability insurance
  6. Vehicle insurance
  7. Business interruption insurance

Just by the names of these insurance types, you can tell that you don’t need all of the insurances listed above. Instead, different types of businesses need different types of insurances. Basically, the more risk that comes with your business, the more insurance you should have. For example, businesses that have stoves and delivery drivers will need more insurance than someone who runs a franchise selling clothing.

All in all, there is no one number that anyone can give to determine the cost of opening and operating any franchise, even if they know the franchise they want to buy into. This is because there are so many costs, in addition to the franchising fees, that vary based on everything from insurance to the location of the new business. So, make sure to consider all the variables before you sign up for buying a franchise business.


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