Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of HomeVestors Franchise Costs (2014 FDD)

by Franchise Chatter on January 28, 2015

in Franchise Costs, Real Estate Franchise



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Homevestors

Detailed Estimates of HomeVestors Franchise Costs Based on Item 7 (Estimated Initial Investment) of HomeVestors’ 2014 Franchise Disclosure Document

  • The Full Franchises and Associate Franchises offered are for the right to operate a business to buy, sell, and rehabilitate residential and commercial properties and provide certain services to buyers and sellers.
  • Full Franchises have a higher initial fee and generally lower ongoing fees than Associate Franchises, either of which may be operated on a full-time or part-time basis.

For Full Franchise

  • In general, none of the expenses listed in the chart below are refundable, except any security deposits you must make may be refundable. HomeVestors does not finance any portion of your initial investment.

1.  Initial Franchise Fee:  $50,000

  • If you purchase an Associate Franchise, a portion of the Associate Royalty Fee you pay to HomeVestors will be credited toward the balance of the initial franchise fee due if you choose to upgrade to a Full Franchise.

2.  Leasehold Improvements:  $0 to $5,000

  • You are not required to get an office, or you may already have a suitable office in which case no expenses would be incurred.
  • You may need to make minor adjustments to your office space (e.g. build walls) to meet the franchisor’s requirement that your HomeVestors Business is to be kept separate from any other business activities. You may also have to replace carpet or paint walls to create a professional image.

3.  Furniture, Fixtures, and Equipment:  $0 to $10,200

  • If you do not have an office, there will be no cost.
  • The variation in costs for furniture, fixtures, and equipment is based on differences in size, configuration, condition, and location of the office and how many of these items you may already own.
  • This includes the required computer equipment, non-proprietary software, phone system, and electronic paging devices.

4.  Signage:  $0 to $4,200



  • This may include magnetic signs, yard signs, and a 2-foot by 10-foot panel size sign. The cost of the panel sign may be increased per any landlord requirements or local ordinances. In certain cases, your lease may not allow you to have a sign, in which case no cost would be incurred.

5.  First Month’s Rent:  $0 to $2,000

  • If you have an office, HomeVestors estimates the minimum rent based on 600 square feet at the national business office rental average of $14 per square foot.
  • Rental costs can vary significantly depending on the area of the country in which the office is located, the size, condition, and location of the premises, and the availability and demand in your local real estate market.

6.  Security Deposit:  $0 to $2,000

  • If you have an office, HomeVestors estimates the security deposit to be 1 month’s rent.

7.  Opening Supplies:  $200 to $1,950

  • This estimate includes business cards, stationery, 3 to 12 yard signs, and miscellaneous office supplies.

8.  Advertising:  $6,000 to $60,000

  • If you are Level 1 or Level 2, HomeVestors strongly recommends that you spend at least $1,000 per month on advertising (Levels are based on Qualifying Transactions and Aggregate Sales during an anniversary year).
  • If you are Level 3, you must spend at least $1,000 per month on advertising.
  • If you are Level 4, 5, or 6, you must spend at least $3,000 per month on advertising, but many franchisees spend more than $3,000 per month, and depending on the market conditions, some spend up to $15,000 per month on advertising.
  • You must pay for your advertising upfront, before advertising through HomeVestors (whether by yourself or through an Advertising Council).
  • Advertising is paid in advance, on the last day of the month that is two months before the month of advertising, except that you must pay for your first month of advertising in advance at the time of your initial training (or two months if you elect to advertise through HomeVestors in the month immediately following your initial training).
  • Failure to pay on time will exclude you from advertising placement by HomeVestors for any month you fail to pay it timely.

9.  Training Expense:  $1,800 to $6,000

  • This figure represents travel, lodging, and meals for 1 to 2 persons based on a 6-day training period, plus any in-field training. You may have to train more people.

10.  iPad and Computer Equipment:  $2,000 to $10,000

  • This is an estimated cost for 1 to 2 Apple iPads, 0 to 2 laptop computers, printer, and monitor.

11.  Insurance:  $2,000 to $8,000

  • You must obtain the insurance coverage as described in Item 8. The amounts shown here are based upon annual premium payments. The cost of insurance may vary depending on the insurer, the location of the property, and your claims history.
  • Vacancy insurance may be difficult to obtain.
  • HomeVestors may assist you in obtaining coverage, but are not obligated to do so.

12.  Miscellaneous Opening Costs:  $1,000 to $7,900

  • This estimate includes miscellaneous business and real estate licenses, multiple listing service fees, incorporation, legal and bookkeeping fees, and miscellaneous association dues.
  • You must comply with all federal, state, county, and city licensing requirements. These costs will vary from state to state.

13.  Purchase and Repair of Properties:  $12,300 to $129,000

  • This estimate includes $10,000 to $25,000 for the 10% down payment on the purchase (including closing costs) of 1 to 5 properties; $2,000 to $100,000 to repair these properties; and insurance costs of $1,000 to $4,000 you would incur until these properties are sold.

14.  Additional Funds for 6 Months:  $0 to $50,000



  • These amounts are HomeVestors’ estimate of additional funds you will need to cover your expenses for an initial start-up period of 6 months, including:  professional fees in connection with obtaining and establishing your HomeVestors Business; it may include 5 months’ lease payments; and 6 months’ payroll for a full-time coordinator.
  • Allowance for payroll does not include an owner’s draw or salary or any salary for a property buyer, who is typically paid on commission.
  • These figures are estimates and HomeVestors cannot assure you that you will not have additional expenses starting your HomeVestors Business.

15.  Total Estimated Initial Investment:  $75,300 to $346,250

  • HomeVestors relied on its business experience and that of its affiliates and predecessors since 1989 to compile these estimates.

For Associate Franchise

  • The total estimated initial investment necessary to begin operation of an Associate HomeVestors Franchise ranges from $37,300 to $241,250.


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