Do you want to have your own business? One with a proven profitability and marketability? Then, why not franchise a dollar tree store.
Dollar tree stores are very popular given today’s economic situation. Who doesn’t get excited about entering a dollar tree? With products priced at $1 or less, many customers get too excited at the amazingly cheap deals that they end up getting more than they planned.
Some dollar tree stores are open for franchising. Franchising offers the opportunity to have a business with a tested formula.
Dollar Store Franchise Average Cost
To start, you have to pay an initial amount called dollar tree franchise cost or franchise fee. On the average, a dollar store franchise would require a minimum cash outlay of $50,000 with a total investment ranging from $65,900-$463,000. Here are some details of the required funding per dollar store:
- Dollarstore Franchise – Minimum cash outlay of $60,000-$250,000; Total project cost of $150,000-$463,000.
- Dollar Store Services Franchise – Minimum cash outlay of $50,000; Total investment of $65,900-$366,900. The company also requires that the franchisee’s net worth is $50,000.
- Just-A-Buck Franchise – Minimum initial liquid capital of $50,000. The franchise fee will depend on the location.
The fee paid usually covers the following for the franchisee’s start-up:
- Financing Assistance – Franchisors have financing experts who can give financing advice and assistance to would-be franchisees.
- Real Estate Assistance – Some franchisors have a list of pre-approved locations for a store. A franchisee can select from the list or can have a choice location approved by the company. The company usually has a team of experts tasked to assess the demographics, traffic patterns, visibility, accessibility, among others of a location for the franchise.
- Store Set-up – Dollar stores have the same look per company. Some of the services of the company on store set-up are the provision of the store design, selection of the fixtures and signage, lay-outing of the merchandise, ordering of the initial inventories, installation of the Point of Sale (POS) systems and everything else a franchisee needs to open the store.
- Training – The franchisor provides the initial training for the franchisee and its Training topics usually are in-store operations, personnel management, accounting, POS systems, marketing, and business management. A manual of operations is also expected to be provided.
- POS System – The franchisor provides the POS system for uniformity and data generation. The POS system is expected to be integrated into the inventory system.
- Marketing Support – The franchisor provides the franchisees with marketing support including marketing programs, special offers on merchandise and advertising and promotion resources.
When you’re buying a franchise, you’re buying a business with a well-known brand, established a customer base, proven business processes, established distribution networks, and own system.
Other Costs to Consider
The following are other costs that should also be considered aside from the franchise cost to open a dollar tree store:
- Deposit agreements
- Area Development
- Investigation or due diligence fees
- Breach of agreement fees
- Cost of hardware
- Site location and development-related fees
- Costs for equipment, initial inventory, and materials rebates and/or income
- Promotional materials
In a franchising agreement, there are also continuing fees such as:
- Royalty Fee
- Cost of continuing and replacement training
- Leases and property management
- Equipment and signage rental
- Guarantees and warranties
There may be more types of fees or costs depending on the contract between the two parties. These costs do not include the usual business costs such as compensation for staff, payment for utilities, lease and others.
Dollar store companies offering franchising opportunities have different rates as well as inclusions. Thus, it would be best for the would-be franchisee to research, study and analyze the different options available. You can also talk with the existing franchisees to know their experiences of owning a franchise and their working relationship with the franchisor.
When getting a franchise, do not grab the first one you come across with. Look for a business brand with the following:
- Credibility and proven marketability.
- Proven track record.
- Support system offered by the franchisor.
- Potential growth.
Want to own a dollar store but don’t want to franchise? Dollar Stores by Liberty Opportunities offers turn-key packages from $62,900 for a 1,000 sq. m. area to $265,900 for a 10,000 sq. m. area. They also have a DIY package for $29,900. Since it is not a franchise, you won’t have to pay for percentages, royalties or set up cost. It is another business formula you might be interested in.
Before taking the plunge, consider all costs both initial cost and continuing costs. Then, look beyond the numbers and look at the quality of the brand. Find a company that offers a support network and an already established supply chain.
Dollar Store Franchise Cost Factors
Not all dollar store franchises are priced the same because not all are the same. The following are the cost factors involved:
- Popularity of the Brand – The more popular the dollar store brand is, the more expensive the franchise cost will be.
- Success stories of franchisees – The increasing number of the brand’s franchises can be an indication of its success. Successful brands are expensive.
- Profitability of the brand and earnings potential – Profitability is very important in any business. Dollar stores with high profitability and earning potentials tend to be expensive.
- Territory Exclusivity – A franchisee may want to have a territory exclusivity clause in the contract to capture the market in the locality. Some companies allow this. Some do not. However, if there is this clause, then expect that the franchise cost will be higher.
- Inclusions in the franchise fee – Though there is a basic package for a franchise, some companies offer more features than the other companies making the franchise cost more expensive.
- Continuing/ongoing fees – Aside from the initial franchise cost, there is also the continuing fees needed to be paid by the franchisee to the franchisor depending on the details of the agreement. Some companies have higher franchise cost but lower percentage for royalty fees.
What Else You Need to Know
In 2015, there were already 29,189 dollar stores in the United States. It is projected to increase to 34,261 dollar stores by 2020. That is how popular and profitable dollar stores are.
Franchising a dollar store gives you the best of both worlds. You become your boss, but you are also supported by a network of similar businesses. If you’re up to it, then go ahead and open one!