Starting a Franchise (leased, loans, insurance, small business)

[NJ987654]

My wife and I are thinking of starting a daycare through a major franchise. The upfront costs of start up are approx 650K including building, setup, computers, training, and working capital.

What are some options to finance this debt? I'm new to the idea of starting a franchise... what should I be thinking about during the planning stage? Any help is appreciated

[NJ987654]

Any advice?

[sunsprit]

A franchise is no different financially for you to start up than any other business.

You should have at least two years worth of your currrent household expenses saved up, or some assured income source that will cover those expenses independently of the business.

The figure you cited to open the doors ... how much of that is secured by assets and how much is blue sky? What compensation does the franchisor get along the way as you operate? How soon do they project a "typical" franchise will "cash flow" positively? Will it be an adequate ROI for you, and compensate you fairly for all your time/effort?

Sources of capital: (1) your savings, (2) a small business loan (either bank or SBA backed loan, or other government backed loans), or (3) investor/partners in your venture. If there's a lot of "blue sky" in this business start up, you'll be looking at likely needing 40% of the start up money before seeking a business loan. Without a personal proven track record in the business and capital assets securing the loan, a bank has little recourse if you can't make the payments and business work.

Are you seeking to build your own building? Is this a more cost efficient use of your capital than a leased facility?

You should have a competent attorney and CPA involved in your planning decisions, their advice will be critical to the long term success of your business. You'll need business insurance, too, so line up a qualified commercial lines insurance agent and investigate what it will cost you for this coverage.

Do you know where your staffing/help will come from? Who did the market research and determined that a viable market exists (as opposed to pure need perspective) for this business where you intend to locate it? Will you be running transportation? where will you get the vehicles and drivers?

There's literally thousands of issues that need to be addressed with a start up business ... even if it's a franchise and they've reduced much of the start up to a licensed formula. If you've not run a successful small business before, I'd be looking very hard at your qualifications and motivation and ability to do so with this much money up front at stake. Especially if you've not done this type of work on a larger scale .... it's not the same as babysitting a couple of kids out of your house.

Good luck.

[fredosmith]

I think you have to try for loan or take the money from somebody for some time.
Because if you want to start new franchisee than you will need more investment.