Buying a daycare franchise is not as daunting of a task as starting one from scratch. This can be an excellent way to enter the child care industry. You don’t have to worry about establishing a new brand. Even though buying a franchise makes some aspects of opening a daycare easier, it can also bring with it its own set of challenges.
Are you considering buying a daycare franchise? If so, it’s important to be armed with all of the necessary information in order to determine whether franchising would be the best route for your childcare business. This post will be your quick guide for starting a daycare franchise. But first, we will define what this kind of business entails.
What is a daycare franchise?
A franchise is a legal deal between a company (the franchisor) and an individual (the franchisee). The latter uses the former’s business processes, brand, and trademark.
In the child care industry, business owners tend to buy into a franchise. Furthermore, the franchisor typically supports the franchisee in terms of business operations and training.
A quick guide to starting a daycare franchise
Your role as the franchisee
When you buy into a franchise, the business you’ll establish will become one of the company’s branches. Although franchise agreements typically vary, you can expect that the company will support you, since they usually require all of their branches to follow their consistent guidelines and practices.
The costs involved with buying a daycare franchise
Before you invest in a daycare franchise, you need to consider the expenses that accompany this transaction. Some companies will charge extra fees, such as an initial franchise fee. They can cause between $10,000 to hundreds of thousands of dollars.
Here are some of the regular costs involved:
Legal and accounting fees. As a business owner, you need to allocate fees for legal and accounting services. You will use this to review the Franchise Disclosure Document provided to individuals interested in a franchise. It gives details regarding your fees, franchise agreement, and the franchisor. Legal fees differ, but they can range anywhere from $2,000 to $5,000.
Startup costs. The franchisor will give you a list of specific things you need to purchase in order properly to align with their brand.
Royalty payments. Franchisees will regularly give royalty payments to the franchisor for using their name. Typically, they are percentage fees paid weekly or monthly. Owners can expect to pay five to ten percent.
These fees add up to the primary investment necessary in order to operate the daycare facility. Nearly all franchises will demand a minimum initial investment to determine if you can cover the costs of starting a daycare center. The minimum amount will depend on whether you’re leasing or purchasing a franchise.
Also, remember the startup costs related to the franchisor. Here’s a list of some considerations:
- Rental or purchase
- Licensing fees
Advantages of starting a daycare franchise
As mentioned, you can avail yourself of all of your franchisor’s support. They are equipped with industry know-how and are successful in this business. Moreover, their experience will deliver a competitive advantage.
You will have access to marketing materials for branding on their facilities. These should include your signs, brochures, and building exteriors.
Additionally, you don’t have to find your own operations management software system. This will help prevent errors because of the automated systems that are already set up.
A daycare franchise has the potential to expand your business. However, it’s also important to consider any potential pitfalls, and ensure that this decision is the right fit for you.
If you’re concerned about the downside, then it might be best to look at other options. For example, an independent child care center works better for some owners due to lower costs. You can hire your own staff and manage all aspects of the business yourself. But make sure you gather all of the necessary information on how to start a daycare franchise before making a decision.
Disadvantages of starting a daycare franchise
The franchise fee is not the only cost involved. There will also be a percentage of your revenue that you have to share with the franchisor.
A second possible disadvantage is that you’ll need to attend monthly meetings and training sessions, which can take up a lot of your time.
A final disadvantage for some daycare owners is the loss of control over your business. The franchisor has developed a proprietary system, and you are not allowed to make changes.