Item 7: Estimated Initial Investment
Content: This item includes a comprehensive list of all the expenses you can reasonably expect to incur as you open the business.
Purpose: The objective of this section is to give you a reasonable expectation regarding the total cost to you should expect to incur as you open the business and operate the business for at least the first three months.
Tips & Advice: Like Item 6, this item is a tremendous safeguard for the franchisee. It includes all expenses right down to training fees and travel and lodging associated with training. In addition, this item typically includes a minimum recommendation of set-aside cash flow as you start up the business and incidental, business related costs. Many franchises will specify a minimum of three months of living expenses, and quite often more. During the validation stage of your franchise investigation, this is an area in which you will want to ask the existing franchisees to disclose more detail. You’ll find great detail on how to structure your financial conversation with the franchises in Chapter 11.