Mistake Number 3 Prospective Franchisees Make in Purchasing a Franchise
Failure to put together an accurate personal statement
It infuriates me to have to pry financial information out of a prospective franchise owner. Before a prospect makes an appointment with a franchisor he or she should know how much money is available for investment purposes. Not guesstimate, but hard cash. I will never understand how people can treat this subject so lightly. Here they are talking about making an investment of many thousands of dollars and yet oblivious to the consequences of a bad judgment. Once you're in, there Is no turning back. The players and the money are real.
Start-up cash requirements for selected industries
Perhaps the biggest mistake franchisees make is to underestimate the total number of dollars needed to start a business.
Franchise Costs
The franchise fee and equipment costs should be accurate. Special pieces of equipment, not included in the standard equipment package, are extra. Don't forget to include taxes.
Signage is another matter entirely if interior and exterior signs are part of your franchise package. Sign dimensions are controlled by city, town, county or state ordinances.
The opening inventory should include everything you need initially. Get a list of inventory from the franchisor. You may want to check with existing owners. Some franchisors control the companies that sell to the franchise owners, and the tendency, not a common practice, is to load up a franchisee with an opening inventory. This is good and bad, but most of the time the excess inventory is not needed and limits cash flow.
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