Things You Need When You Buy A Franchise

The cost of opening a Tree Service Franchise varies depending on the number of locations you want to operate and how much you need to invest in setting up each area. Some of the details are:

• Franchise fees for one territory. 
• Fee for a royalty on monthly profits.
• Other amounts of liquid capital (cash on hand).
• Some net worth. 

Usually, the tree service franchise fee is about $49,500 for a single region. You get your exclusive territory, with a population of at least 200,000, with significant discounts.

It takes about 450 to 510 days (a year and a half) for a franchise to be truly up and running while paying your royalties. Then you’ll be a franchisee. 

That might sound like a lot of time, but it is about the same as starting a new business. And it comes at a lesser human and financial cost as well, for both the franchisee and franchisor. 

Dig All The Dirt You Can On The Franchise

Digging for relevant information, bad reviews, and so on, will give you the confidence to make the right decision. Surf the web until you’re satisfied with the results, and if you found negative things about a franchise, then feel lucky about knowing and keep doing your research. You’ll find a trustworthy option if you do your due diligence. 

Talk To Other Franchisees

Most importantly, get the word straight from the horse’s mouth, or in this case, from the other franchisees. A good franchise will provide you with the Franchise Disclosure Document (FDD) with information about its other locations, but also with the contact information, so take advantage of that and talk to other franchisees. This document will help you to contact them and request objective brand information.

Master of Your Finances

Your finances will help you determine what kind of franchise is within your control. Don’t overstretch your finances just to get the big, popular franchise everybody wants. You might have to settle for something more manageable like a tree service franchise smaller, but in the long run, it will be much easier to manage, and that means a better return on investment. You have options when it comes to controlling your finances and getting the access that you need. 

Even if the franchise fees (money they pay to buy the right to a franchisee) are a certain amount, all franchisees must be mindful of their finances, that you have sufficient capital to support the overall cost of setting up a new franchise site. You will also be asked by the franchise for a minimum net value (what the total wealth is).

You’ll need an average of $250,000 to start a franchise, although a tree service franchise might ask you between $100,000 and $200,000. The average royalty fees paid by franchisees range from 3% to 6% of monthly gross sales.

Research The Industry You Are Entering

Even before you start picking apart each franchise and their locations, you have to research the industry you’re interested in. Research how many companies and businesses are part of it, it’s worth, growth projections, the needed investment, and the skills to enter it. 

The tree service industry, for example, is expected to grow to a $20 billion one soon, it doesn’t take that much previous experience to enter it, but it does require some investment in equipment and good customer service and even interest in knowing more about urban development and housing. 

It’s things like that you should be prepared for. 

Consider Your Location

Your first franchise location will have to rely on people you already know in an area near your original one, and rely on customers who know the brand you are buying well and want more of it. That new franchise location is going to reel new customers, and then you’ll expand once more, with new franchisees, new market segments, new geographic areas, and more revenue and earnings.

Things To Watch Out For

Your Contractual Agreements

You need to be careful in the making of a contractual agreement, and pay extra attention to all the details, so you won’t end up losing more than you’re gaining. This happens after a franchisor is sure you’re the new franchisee that will help them expand the company, and so you will be offered a contract explaining the obligations of both parties. Its important that you know and understand everything that’s written in the Franchise Disclosure Document that will be sent to you; since this is information that The Federal Trade Commission (FTC; the country’s consumer protection agency) feels imperative that you should. That being said, FDDs are usually 150 to 200 pages long and it definitely poses some difficulties getting through it on your own. Make sure you have a franchise attorney at hand and ready to review the contract.

As most guides will tell you, seeking help from a franchise lawyer is the best course of action. Their expertise in federal law and franchising can not only help you understand the FDD in its entirety but can also help you negotiate changes or point out any red flags before you buy into a franchise. There will be plenty of time to do so since, the franchisor is required to give you the contract with enough time in advance for you to look over it and negotiate even aspects of it. 

Franchise Royalty Payments

By owning a franchise, you’re helping a company that is already popular grow. But to make a profit from the success of somebody else’s company, you must pay an entrance fee, and you have to do some work if you want to make money out of the market and share your winnings, i.e., pay royalties. 

Paying Your Fees

You have to pay a franchise fee to be part of a successful franchise company, and for this, you will have to pay a fee to any franchisor when you get a tree service franchise—price ranging between $30,000 and $50,000. Although this does not include other expenses, such as inventory, labor, preparation, etc. 

Franchise Royalties

Also, you still have to pay royalties to the franchise —mostly every month— once you have paid a fee for having the rights to a tree service franchise and being part of the brand. How much you pay depends on the franchise, but generally is of 4% to 12% of the monthly income, which will also depend on the industry you’re willing to invest.

Other Fees and Discounts

Most franchisees will need you to pay a monthly marketing fee, but it can vary according to the franchise type. Some may even have discounts on whether you are a migrant, a veteran, a female, or if you pay royalties early, before time, or if they want to expand into your market, and provide additional incentives.

Most franchises also have exclusivity and secured territories, which ensures that they will value your land without offering their franchise in your area to anyone else.

The Burden of Sharing a Reputation

When buying a franchise, reputation is everything, as you have to protect the name of the company and your acquisition. If there is something you should watch out for, then that is the burden of sharing a reputation that goes with your work-ethics so that you can provide your franchise and the community an excellent service. 

The Qualification Requirements

As with most things in business, qualification requirements are needed, and here we are going to explain to you some of the elements you have to consider during the process of buying a franchise. 

Purchasing Required Assets

A franchisor tends to demand you have some net value of assets to your name, which is another way that a franchisor can decide whether to do business with you or not—your products, liquidity, inventory, etc. The net value requirement can sometimes be as high as the start-up costs. In a tree service franchise, a net worth of $350,000 is typically required.

Liquid Assets

The cash on hand or the money you are prepared to invest in the company is called equity or liquid assets. As if a landlord were requesting income proof and a deposit plus the first month’s rental for potential tenants. A tree service franchise could ask for liquid assets of at least $100,000.

Skills & Experience

Of course, net worth and wealth is also a sign of excellent financial governance skills and expertise. Still, every franchisor is primarily interested in the excellent management of a potential franchisee, followed by local market knowledge, which is why companies want franchising in the first place.

Note also that the franchisee’s not only telling others about their background in the tree service business but also learning from the franchisor. The franchisor could also benefit from an experience in creativity and risk-taking.

Credit score 

To cover certain expenses, including maintenance, equipment, training, etc., you need to qualify or show that you can be eligible for lending and credit lines. Without being even a nominee for a franchise, a good credit score is a must. You can also support the franchisor by approaching local lenders, or you can ask the Small Business Administration to help you apply for a franchise loan from banks or other lending institutions. Learn more about it here. Having partners is always a good option if you don’t want to take all the risk yourself.

Net worth

In addition to cash on hand or assets, a franchise usually asks you for minimum net value (total wealth to your name). For example, a tree service franchise typically demands anywhere in net-worth from $250,000 to $350,000.

Net value is another way a franchisor can choose to do business with you—money, liquidity, inventory, etc. Your net worth for a tree service franchise will, on average, be around $350,000.

Cash on hand

For any franchise, most franchisors require a minimum amount of capital to start up or to take you seriously. They will check the liquidity, which is the cash on hand, or the money you have to invest. Like when a landlord is asking prospective tenants for proof of income. The average liquid capital a tree service franchise requires is around $100,000. 

Outside income

It will always be of great help that you have an additional source of revenue outside the franchise, as it will give you the chance to prevent any situation that may hinder your progress as a franchisee. 

Industry experience

It’s always preferable to have some sort of experience in the tree service or even landscaping industry, but it’s not a prerequisite. The main skill any franchisor requires is good management and experience with the local market, which is why companies are primarily interested in franchising. However, note that the franchisor’s expertise is not only in the Tree Service franchise business but also in the franchise company. The franchisor could therefore also have an ability to innovate and take risks.

Workforce & Labor

You have to hire, train, and maintain your labor force. You’ll be in charge of payroll, severances, legal expenses, everything (unless the franchise specifies they will handle your salaries). 

Supplies

Buying a franchise will require you to comply with their supply rules. Most do require you buy from specific suppliers or contractors. If you are offered more freedom in choosing suppliers that sell the good or product you need, you still have to abide by strict requirements, like maybe buying only electric vehicles, organic ingredients, or American made products. 

Some franchises, like a tree service franchise, have their marketing programs where you can easily buy signage, print ads, direct mail, videos, business cards, and other marketing materials without going out and searching on your own. 

Administrative Legal & Accounting

A good franchisor is always well protected against the risks of trusting someone else with their franchise. They will go through with the legal requirements before you even start, and also be protected against any mistakes you make. You will incur the cost of signing the contract (unless otherwise stated by the franchisor) and other necessary legal fees for opening the business in your city or state. If you get a franchise attorney (which is recommended), you will also incur this cost by yourself. The typical price for a franchise attorney is between $1,500 to $5,000. 

Taxes

Do franchises even pay their taxes? Yes, like any small to medium size business, they have to pay local and state taxes. As a franchise owner, you are merely paying for the right to use the brand, along with the know-how of another established business. However, you are still a business with legal rights and responsibilities. 

Management experience   

If the brand’s products or services go with your own personality and goals, go for it. Managing a restaurant franchise is not the same as managing a tree service franchise, not in terms of sales, customer service, investment, and more.   

It’s going to be hard to convince a (example)  tree service franchise to take a risk with you if you don’t have any experience or proven skills with business management, either as an employee, supervisor, or owner of a previous business. Having the required capital and net worth won’t be enough if you’ve never proven to be a good manager or part of another small business in any way. A degree in business management certainly helps, but proven real-world experience is even better.