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Buying A Franchise - Franchise Investment Requirements; Franchise Breakeven Point - Mr. Franchise Weighs In

Discuss anything to do with property law - buying, selling property

Buying A Franchise - Franchise Investment Requirements; Franchise Breakeven Point - Mr. Franchise Weighs In

Postby Kobbi » Thu Apr 07, 2016 9:00 am

when I searching for some franchises I found some requirements  

in the requirements I found 3 statements confuse me here it is for instance ,

Minimum Cash Requirement: $23k

Total Start-up Investment(cash plus financing): $236k

Minimum Net Worth: $500k

whats the difference between the 3 statements ?

wish to hear from you soon

thanks
Kobbi
 
Posts: 46
Joined: Fri Feb 14, 2014 4:24 am

Buying A Franchise - Franchise Investment Requirements; Franchise Breakeven Point - Mr. Franchise Weighs In

Postby Williamson » Sat Apr 09, 2016 12:55 am

Let's start with the largest number first - Minimum Net Worth $500k. This is what they want your total assets minus total liabilities to equal. Half a million dollars, about double the total start up investment of $236k. One way to interpret this requirement is you may need to put this amount into the business, at a minimum and perhaps much more, to cover the start-up investment AND reach the break even point, where the business revenues just cover operating expenses. Hopefully, the business will get beyond the break even point and into the franchise profitability zone.

Total Start-up investment($236k) is usually the amount it takes to get the franchise started. It includes such things as leasing the location, building it out, getting the necessary equipment, hiring employees, advertising expenses, etc. It also covers some amount of working capital for a short, start up period(usually only 3 months). It is NOT the total amount of money you need to invest to reach the franchise break even point. Many franchises can take a long period of time(a year, two years or more) until they reach break even. If you don't have enough reserve capital to reach this point, your entire investment will go down the drain. Also, note it says "(cash plus financing): $236k." This may mean the start=up investment is actually more than $236k because a larger amount is financed.

Minimum cash requirement of $23k is usually just the deposit or initial franchise fee payment, the first of many expenditures you'll need to make.

There are some good articles on the Franchise Foundations website about evaluating franchise investments. Go here as a starting point:http://www.franchisefoundations.com/franchisearticlesii.htmlhttp://www.franchisefoundations.com/buyingafranchise.html

For information about the FDD go here:http://www.franchisefoundations.com/fddevaluator.html

And don't forget to use a good franchise attorney before signing any legal document. Kevin B. Murphy, B.S., M.B.A., J.D.

Mr. Franchise

Franchise Foundationshttp://www.franchisefoundations.com/franchiseattorney.htmlhttp://www.franchisefoundations.com/franchiseexpert.htmlhttp://www.franchisefoundations.com
Williamson
 
Posts: 51
Joined: Sat Jan 04, 2014 5:38 pm

Buying A Franchise - Franchise Investment Requirements; Franchise Breakeven Point - Mr. Franchise Weighs In

Postby Boetius » Thu Apr 14, 2016 10:19 pm

when I searching for some franchises I found some requirements  

in the requirements I found 3 statements confuse me here it is for instance ,

Minimum Cash Requirement: $23k

Total Start-up Investment(cash plus financing): $236k

Minimum Net Worth: $500k

whats the difference between the 3 statements ?

wish to hear from you soon

thanks
Boetius
 
Posts: 42
Joined: Wed Jan 29, 2014 7:44 pm


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