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Costs Associated with an Investment in Day Care.
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1. The cost of guidance.
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(Franchise) |
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(Consultant) |
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Day care franchise fees are currently running between $25,000
to as much as $50,000 depending upon the franchise you choose. In addition
to franchise fees day care franchises also routinely charge: royalty fees,
site selection fees, advertising fees, training fees, and others. These
fees can easily cause an investor's initial investment to be double or more
the cost of the franchise fee. |
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I charge $150 by the hour for my services and I bill expenses at cost. I require a retainer before I start a project and I require a travel retainer each time travel is required. For repeat clients I offer services at a flat rate per job.
Many investors are very comfortable with their specific areas of knowledge whether it be construction, furnishing, curriculum design, or staff training. Because I work by the hour, I can bring expertise to the portions of the project where expertise is needed and save the needless expense in other areas. |
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2. Site Selection Fee
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(Franchise) |
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(Consultant) |
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Many day care franchise's charge a site selection fee. These fees can range up to $10,000.
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I charge no site selection fee.
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3. Leasehold Improvements
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(Franchise) |
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(Consultant) |
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Leasehold improvements are the costs associated with turning leased space into an appropriate place to conduct your business. In day care, this typically consists of adding toilets, increasing the HVAC capacity, color coding on walls and carpets, and adding a good deal of built in cabinetry. Costs for leasehold improvements will range from $50,000 to over $250,000 depending upon the size of the project and what the space was prior to conversion.
Day care franchises negotiate these fees on behalf of their franchisees. Frequently a franchisee is required to pay the full price of the leasehold improvement even though the Franchise has negotiated for these expenses to be paid for by the builder and built back into the franchisee's rent. In these case, the franchisee is essentially paying for leasehold improvement twice!
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I am very experienced in designing day care centers in leased space and in negotiating for the services needed to convert the space. Any benefits I negotiate are benefits made directly to my clients. I charge no additional fees and I do not expect any percentage of the monies or savings negotiated.
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4. Cost to Furnish & Equip
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(Franchise) |
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(Consultant) |
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Costs to furnish and equip a large center will generally range from $50,000 to $150,000 depending upon the style in which the center is furnished. Playground equipment will range from $10,000 to $50,000 again varying with the type and amount of equipment.
Many day care franchise's charge their customers a flat fee for furnishing and equipment even though they have negotiated a significant discount from the manufacturer because of their ability to buy in quantity. This cost to the franchisee is considered part of their profit./
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Costs to furnish and equip a large center will generally range from $50,000 to $150,000 depending upon the style in which the center is furnished. Playground equipment will range from $10,000 to $50,000 again varying with the type and amount of equipment.
Because of the quantity of material it takes to furnish and equip a large school, quantity discounts can be available with negotiation. Any discount I am able to negotiate is done strictly to your benefit as the investor. My fee is not changed.
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5. Initial Operating Capital
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(Franchise) |
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(Consultant) |
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All initial investments require working capital to run until they attain positive cash flow. The time it takes a day care property to attain positive cash flow is directly dependent upon the growth rate the property experiences. I've seen investor's led to believe that their properties will experience growth rates of 30% or greater in their initial months. Based on these growth rates, I've seen investor's led have working capital in hand of $25,000 or less.
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I develop working capital estimates for my investor's center by center. I design a working pro forma based on area specific costs (i.e., rent, competitors rates for child care, local utility rates, local wage rates by job category, etc.) and typically use a of growth rate of no higher than 10%. Even in areas of high growth, I help investors understand what it will take to operate their business if for some reason it does not fill rapidly. I have rarely led an investor to have less cash available than $100,000
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6. Royalty Fees
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(Franchise) |
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(Consultant) |
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Day care franchises charge ongoing royalty fees for the life of the franchise agreement. Franchise agreements can range from as short as 10 years to as long as 30. Royalty fees in day care tend to range from 5 1/2% to about 7 1/2 % of gross revenues. Royalty fees are paid from the day of opening whether your center is experiencing profit or not. Even using the lower fee rate, an investor will pay somewhere between $500,000 to well over $1,000,000 over the life of the franchise agreement. |
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I charge no royalty fees! Your center is yours outright.
I offer optional training and management agreements for
investor's who want them.
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