Should You Open a Coffee Shop Franchise?
At FranchiseHelp, we see thousands of visitors each month from budding entrepreneurs who think that selling coffee to their fellow caffeine addicts could make for an exciting and lucrative venture.
Naturally, many folks considering a coffee business find their way to FranchiseHelp, searching for information on massive franchise brands like Dunkin' Donuts; retail giants like Starbucks (sorry, it's not a franchise!); more modest franchises like Seattle's Best, The Coffee Bean & Tea Leaf, Scooter's Coffee, and Coffee Beanery; mobile coffee carts like Maui Wowi; or even alternative in-office coffee service franchises like Xpresso Delight.
There's no question the global coffee industry is absolutely enormous (an estimated $430 billion in 2019) and growing nicely at nearly 6% per year (with even greater growth potential in less crowded segments like commercial and office coffee).
But is there any opportunity left for an individual to get in on the game? And if so, how much would it cost to open a coffee business?
Oakscale, which works with high-growth emerging franchise brands, writes about the costs and economic potential of the coffee business for those looking to break into this industry. In particular, they discuss the potential investment required, factors many entrepreneurs don't think about upfront (supply chain, driving foot traffic if your store is not in an ideal location, and alternatives to a traditional coffee shop).
How to Fund Your Franchise Acquisition
Even if you have all of the required start-up capital sitting in your bank account, and even if you have mentally prepared to invest a considerable sum into a franchise, you may be wary of risking your very bottom dollar for the new venture. There are alternatives, including raising debt or equity funding, but both of these options come with a set of benefits and drawbacks that you'll need to weigh carefully before committing to any particular path.
What Happens When a Franchise Contract Ends? Obligations Upon Termination
The franchise agreement should also address who gets to use the franchisee’s phone numbers after the franchise agreement expires. Traditionally, this right has belonged to the franchisor, but with home-based businesses becoming the norm, franchisors that allowed franchisees to use their home phones or existing cell phone numbers might have an issue regaining control of this component of their former franchisees’ business presence.
What is an Area Representative?
The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.
