Many franchisors will also specify a minimum liquid cash requirement for those who want to open one of their franchises. This requirement is an amount of money the franchise believes a franchisee should have in savings and be able to access quickly, if needed.
Most often, the liquid cash requirement includes an estimate for emergencies and setbacks. It also typically accounts for regular living expenses until the franchise unit begins turning a profit large enough for the franchisee to garner an adequate take-home wage. Note: While these costs are common, they may not apply to all franchises.
Also, be sure to go over any franchise agreements with a franchise lawyer and accountant before signing. Sign up here to get the latest franchise opportunity updates and more delivered directly to your inbox.
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Most important is the information that follows — the notes to Item 7. The notes to Item 7 will explain each line of the investment chart, giving you information upon which you can localize some of your anticipated costs and upon which you and your advisors can begin to build your business plan. Also, many franchisors will include tidbits of information important for you to know that will not appear elsewhere in their disclosure document. It is important that you understand what the franchisor is saying in the notes to the initial investment chart.
Where you have any questions, call the franchisor and get the information you need. Most franchisors will provide you with the details you require.
Articles Home. By Michael Seid, Managing Director, MSA Worldwide You need to be prepared to make a sizeable investment in the development of any business, and franchising is no different. All any franchisor can do is provide you with an estimate of the initial investment you will need to make. Market conditions, development costs, and unit operating results will likely be different from what the franchisor projects.
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