When researching franchise opportunities online, you will come across several lists with names like, “Top Franchises Under $30,000” and “Cheap Franchises Under $10k”. While these make for good headlines, does it really make sense to shop for a franchise by price point? Here, national franchise lawyer Jeffrey M. Goldstein shares his thoughts.
1. What is the “Price Point”?
When talking about franchise price points, it is important to ask: What “price point” are we talking about? Generally speaking, there are three options:
- The Initial Investment Fee disclosed in Item 5 of the Franchise Disclosure Document (FDD)
- The total estimated initial investment disclosed in Item 7 of the FDD
- The total cost of ownership over the lifetime of the franchise
Most online lists focus only on the Initial Investment Fee. There are a couple of reasons why. First, this number is easy to find, and this makes it easy to compile a list. Second, this is the lowest number that can reasonably be characterized as the “price point” for a franchise. So, while this number ultimately only reflects a small fraction of the cost of franchise ownership, it is a good choice for marketers seeking to get clicks from prospective franchisees.
2. Price Point is Only One of Several Factors to Be Considered
While the amount of money you have available to invest in a franchise is certainly a factor to be considered, it is not the only factor that should drive your franchise buying decision. From brand recognition and franchisor availability to legal risks and franchisee satisfaction, there are numerous considerations that go into making an informed buying decision.
If you are serious about buying a franchise, you will need to narrow down your options based on relevant factors, and then you will need to conduct extensive due diligence with regard to your chosen franchise opportunity. This includes examining the total cost of ownership along with all pertinent legal considerations and your reasonable likelihood of success.
3. In Franchising, More Expensive Does Not Necessarily Mean Better
Buying a franchise is not like buying a house. Spending more does not necessarily mean that you will get a bigger and nicer product. Some franchises cost more because the initial investment is substantial—opening a full-service restaurant or fitness center simply costs more than starting a home-based mobile franchise. However, there are many very good less-expensive franchise opportunities out there; and, even if you have a lot of money to spend, one of these less-expensive opportunities could be a better fit for you.
Request a Free Initial Consultation with National Franchise Lawyer Jeffrey M. Goldstein
Franchise lawyer Jeffrey M. Goldstein has more than 30 years of experience helping prospective franchisees make informed buying decisions. Our firm offers four tiers of fixed-fee franchise review programs for individuals who are considering franchise opportunities. To discuss your options in a free and confidential consultation with Mr. Goldstein, please call 202-293-3947 or request an appointment online today.
