2019/07/05(Source: FCオーナーズ運営事務局)
How much capital is needed to open a franchise store? There are many questions and answers regarding startup costs on the FC Owners' Q&A site. This time, we will discuss the breakdown of startup costs.
(1) Breakdown of Franchise Startup Costs
(2) Two Patterns of Franchise Startup Costs
(3) Key Points to Remember
(1) Breakdown of Franchise Startup Costs
■ Franchise Fee
This is the money paid to join the franchise. Some franchise headquarters offer installment payments, and some even have a 0 yen franchise fee. Franchise fees vary depending on the headquarters, so if you have decided on the type of business you want to run, it's a good idea to compare multiple brands.
■ Security Deposit
This is money required along with the franchise agreement and serves as collateral for various payments. It's similar to the security deposit paid when signing a rental agreement. It's generally refundable upon termination of the contract, but details vary depending on the franchise headquarters, so be sure to check.
■ Property Acquisition Costs
This includes store rental costs such as security deposit, key money, brokerage fees, and guarantee deposits. These costs are not required if you open a store at home. Sometimes, these property acquisition costs are not included in the startup costs. Let's review the detailed breakdown of each franchise's costs.
■ Interior/Exterior & Equipment Costs
This is the cost of preparing the exterior and interior of the store so that it can operate as a franchise. Kitchen equipment and supplies may also be necessary depending on the case.
■ Training Costs
This is the cost for owners and employees to learn know-how and skills. It may be included in the franchise fee.
Training period: 1 week to 2 months, varies depending on the headquarters.
■ Recruitment & Personnel Costs
This is the cost of recruiting staff and monthly personnel costs. Since this affects the satisfaction of the owner's store, avoid having too few staff. Especially during the opening period, which is busy, make sure to secure sufficient personnel.
■ Other
Various other costs may be incurred depending on the franchise headquarters.
Advertising and promotion costs: Costs necessary for advertising at the time of opening and on a regular basis
System usage fees: Fees for using systems common to all franchise stores
(2) Two Patterns of Franchise Startup Costs
■ Pattern where the owner bears all startup costs
Many franchise headquarters recruit owners using this pattern. Many store-based businesses, such as restaurants, may require over 10 million yen in startup capital.
■ Franchise Headquarters Owns the Store and Equipment
The headquarters covers property acquisition costs, interior/exterior renovation costs, and equipment costs, allowing the owner to start a business with only lease payments and inventory expenses. This makes it possible to start a store-based business with low capital.
(3) Key Points to Remember
■ Utilizing Subsidies
Preparing a business plan makes it possible to apply for loans, grants, and subsidies.
"Startup Capital = Personal Funds + Loans/Grants/Subsidies"
Thinking this way lowers the hurdle for fundraising. However, full financing is difficult, and in most cases, it is necessary to prepare about half of the startup capital as personal funds. If you are worried about fundraising, consult with FC Owners.
■ Financial leeway after opening is necessary
Monthly sales may be unstable until repeat customers are established. It is reassuring to have enough funds to weather the unstable period for at least 6 months to 1 year.
This concludes our summary of the costs involved in starting a franchise. While various expenses are necessary, securing funding is entirely possible with proper preparation. First, find a franchise that interests you, and then gradually take steps towards independent business ownership.
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