Picking a franchise to purchase may be a challenging task for some. For current business owners looking to expand their income, you may have to research the current market trends and franchise opportunities available in your area.
One of the faster-growing businesses that profit during the holiday is liquor stores. For business owners looking to expand their portfolio, alcohol sales can be a lucrative business during the holiday season, hurricane season (dependent on your state), and the trends in the United States.
According to Overproof, COVID-19 increased the off-premise sales of alcohol by 17.6% from 2019 to 2020 in the United States. The market is currently expected to grow annually by 9.06%. With that being said, those who would want to franchise an established liquor store may see this as a perfect time to invest.
Here’s what you need to know:
Average Cost of Opening a Liquor Store/Franchise
Regardless of whether you are opening a franchise or a new business itself, you have to consider all the costs of creating this type of business as the business owner. If a startup is in your deck of cards, meaning a new location and new inventory, you are looking at spending between $50,000 and $100,000 at a minimum. This covers a range of things such as inventory, equipment, staffing, shelving, renovations, etc.
If you’ve purchased a preexisting liquor store location to open a franchise, your costs will be significantly cheaper as you only pay to acquire the already functioning business.
Most companies charge a fee to start a franchise, paid upfront or in installments. It is non-refundable, and the amount varies with each company. Before getting into any agreement, be sure to research and understand all the relevant franchise fees you may have to cover while in operation. Be aware of the following expenses that you may have to pay as a franchise:
- Franchise Fees: a fee or charge that the franchisee pays the franchisor for the right to enter into a franchise agreement. A franchise fee can range from $20,000 to $50,000 on average.
- Royalty Fees: a fee the franchisee pays to use the franchise business idea and brand.
- Advertising Fees: an annual fee paid to the franchisor for corporate advertising expenditures by the franchisee.
- Legal Fees: this may be the case if you have a lawyer present to review the franchise agreement.
Not Every Lender Will Provide Start-Up Funding
Due to its ability to remain profitable during any economic environment, a liquor store is viewed as a preferred business to receive loans. Depending on your desired location, a liquor store can make up to $70,000 a year. They are considered recession-proof as the demand for liquor remains high, even during economic dips. Regardless of these benefits, obtaining working capital from a traditional lender can be prolonged and tedious.
Because a franchise loan is similar to a startup, many lenders will hesitate to loan to this type of entity. Traditional lenders may ask to review the owner’s credit, business plan, and assets in the business. It may be more challenging for those looking to open a liquor store franchise. Rather than jump through hurdles, look to a non-traditional or online lender to provide the funds needed to open a franchise.
Depending on the parent company you are franchising from, there may be an option to participate in franchisor financing. This in-house financing option allows you to pay for the franchise fee, equipment, and other startup costs over some time, directly to the company. If that option is not available to you, be sure to research as much as possible with your available lenders if you are looking to acquire startup funds.
Franchises Also Qualify for an SBA Loan
SBA Loans are partially backed by the U.S. Small Business Administration and funded by their intermediary lending partners. While acquiring funds is similar to loans from a bank, the SBA reduces the risk to lenders by guaranteeing a certain amount of the loan. It is an excellent option for franchises, regardless of the lengthy application process.
First Union Lending is Here to Help
While we do not provide startup loans or franchise loans, we have the resources to help most franchised businesses grow! We want to see small businesses across America become the successful entities they wish to be. This is why we do what we do. Our team works with you to get you the cash you need exactly when you need it, not weeks or months from now. We offer short-term loans, lines of credit, and merchant cash advances, among other financing options. And even if your credit score is less than ideal, we may still have a financing solution for you. Call today, and let’s get started.