Can You Afford A Senior Living Franchise?

Owning a Senior Living franchise can be the ideal way to have your own business without starting from scratch. But before you take the financial leap, make sure you look at whether you can really afford to purchase and maintain a franchise.

Total start-up costs for a franchise can range from $20,000 or less to over $1 million, depending on the type of business you select and other factors, according to the International Franchising Association. To determine if you can truly afford a franchise, you must understand the costs involved. Here's a breakdown of some of the major expenses associated with buying franchise:

• Franchise Fees - This one-time, front-end fee ranges from $4,000 to $20,000 and gives you access to the franchisor's business concept, training program and other benefits. L.A. Weightloss Centers, for example, has a $20,000 franchise fee and provides owners with four weeks of comprehensive classroom and in-center instruction. Ace Hardware, which has a $35,000 franchise fee, gives a six-week training class, 30 days of in-store support and interactive follow-up visits.
• Royalty Fees - These mandatory ongoing fees typically runs 3 to 8 percent.
• Working Capital - Like any business, a franchise needs cash to operate. You may need to make the first and last month's payment on your rental agreement plus a security fee. You'll also have to pay a deposit to the electric, gas and telephone companies. Plus you'll need money for the cash drawer, funds to pay employees and petty cash for everyday incidentals.
• Location Expenses - You might have to buy land or a building for your franchise. If you're able rent a building, you'll be responsible any initial deposits, the ongoing monthly lease and leasehold improvements. Sometimes, the building's owner will put these in and figure them into your rental - which can amount to an additional $50 to $100 per month. Some franchisors will give an allowance of $5,000 to $30,000 for any leasehold improvements that are made.
• Equipment Expenses - The type of business you're in will determine your equipment needs. Most banks offer equipment loans that can help you get the fixtures you need for your location.
• Initial Inventory - Franchise owners should generally should plan on having at least a two-week supply of products on hand. Most franchisors will tell you what their opening inventory requirements are, so you can be adequately prepared.
• Signage - External signs can really enhance the look of your franchise, but they can also be very expensive. Most franchisors have offer a sign package that franchisees are obligated to purchase. This sign package allows business owners to maintain a professional look is that consistent with the franchises overall identity.
• Advertising Fee - Most franchisees must also pay an advertising on a regional or national basis. These funds help the franchisor to fund the promotion the overall business concept - which, in turn, provides franchisees with valuable exposure. McDonalds, for example, has nearly $100 million worth of advertising funds that is paid by the franchisor.

Once you've considered all the basic costs involved, don't forget about other requirements that can affect your ability to afford to purchase a Senior Living franchise. Most franchisors have minimum standards relating to your net worth. This is the value of all of your assets, minus the total of all of your liabilities - essentially, what you own minus what you owe.

Franchisors also look at your liquid assets or readily available funds. Depending on the Senior Living franchise, they can require owners to have a minimum network of $300,000 and liquid assets of at least $120,000.

If you don't have the assets available to purchase a franchise, you can try seeking help from outside sources. You can start by soliciting help from family and friends. Or if your business plan is sound enough, you may be able to qualify for financing from the franchisor, a bank or the government. And as a last resort, you could always take on a partner to share the financial and/or operating responsibilities.