Dollar stores have been some of the leading retail businesses that offer quality products for as low as $1.00. If you are considering starting your own dollar franchise, knowing how much does a dollar tree franchise cost will be a perfect starting point.
The Average Cost of a Dollar Tree Franchise
Because of the similarity in the names, people misconstrue Dollar Tree as the same as Dollar General. Please note that they are completely different companies. However, at one point, they competed against each other to acquire Family Dollar, which is another popular American variety chain of stores.
So, the Dollar Tree franchise cost should not be misunderstood as the same as that of the Dollar General franchise cost. The typical franchise fee for dollar stores is between $25,000 and $300,000, with a minimum upfront investment of $63,000.
This cost will normally cover everything that you would need to start up your business, including the initial lease, fixtures, signs, office equipment, and inventory. This also includes the initial dollar franchise fee for using the company’s name, which averages from $20,000 to $30,000.
Unfortunately, Dollar Tree does not offer dollar store franchise opportunities as of the moment. However, since Dollar Tree continuously expands, it is possible that it may begin to franchise stores anytime soon.
Until you can obtain a Dollar Tree franchise, perhaps, owning a General Dollar franchise could be your best alternative. Other popular price point stores include 99 Cents Store, Liberty Dollar, and Just-A-Buck, among others.
Make sure that you check what comprises the franchise you intend to avail of to be able to plan or budget what needs to be financed. This is because some cheaper dollar franchise packages do not include everything that you might need to start your operation.
Therefore, be sure to inquire whether the essential costs will be included or not. Some of these are rental deposits, utility bills for the first two months, store fixtures, display counters, cash registries, and licensing fees for your business, among others.
Nevertheless, the following costs are typically what you expect to spend outside of your startup cost for almost all dollar store franchise offerings:
- Royalty Fee
The franchise fee can be treated as an initial cost, so you can be allowed to start a business using a particular brand. However, to keep that permission within the franchise term, you are required to pay a sort of “membership fee” called “royalty”.
Royalty fees are payments for using the brand name, including advertising and some other support from the main store or mother company. Most dollar store franchises will collect a percentage of your gross revenue.
- Location Cost
The location cost and the actual area are significant parts of the total cost of dollar store franchise. If you plan to put up a franchise in places where the cost of living is very high and you are eyeing a massive store, expect to spend a really expensive amount.
The average area would be 1,000 square feet and would cost you around $40,000 to $50,000. However, you can go as far as 10,000 square feet or higher, and this might cost around $250,000 to $350,000.
- Marketing Cost
Being a dollar store in itself is enough to draw customers wanting a bargain but quality item to buy. However, it is essential to let people know that your business exists in the first place.
As a rule of thumb, small companies earning less than $5 million should spend 5% to 8% of their revenue on marketing. Being a franchisee significantly reduces this since you are under the umbrella marketing of the mother company.
Nevertheless, introducing your business to the public yourself can come in handy. It never hurts to print out and distribute some flyers so that the neighborhood can be alerted of a new dollar store opening. You may also find using social media useful by creating your own company page where you can conveniently promote your products.
Franchise Cost Comparison
Dollar store franchise is definitely a good business considering the market situation nowadays. This is because the franchise cost is way cheaper compared to all the other franchise deals currently on the market.
Below are some of the prominent dollar stores in the US that you can consider franchising:
- Buckstore offers a turnkey package for $40,000. For a “Dollar Only” store model, expect to pay $49,900 for 1,000 sq.ft. up to $219,900 for 10,000 sq. ft. On the other hand, pay around $54,900 to $339,000 for the same range of square footage for a “Dollar Plus” store model.
The package prices would include all merchandise, fixtures and equipment, a complete surveillance system, store opening accessories, office supplies, a completely built out store assembly, on-site training, a professional store sound system, and inventory materials.
- Liberty Dollar requires about $25,000 to $275,000 for a franchise. Prices depend on the square footage of the target store. The price already includes the furniture, fixtures, inventory, and training, together with access to the company’s buying network.
- Dollar Discount Stores of America offers a total start-up investment of around $73,000 to $146,000. However, owners should have at least $20,000 in liquid capital, including good credit and collateral.
- Just-A-Buck start-up franchise capital is $130,000 to $230,000 with a franchise fee of $25,000 and a liquid capital of $100,000. This already includes everything needed to start the business, including the financing, training, and opening support.
Start Your Dollar Store Franchise Business
Obviously, not everyone who wants to start a business automatically has hundreds of dollars to start with.
If you want to start your own dollar store franchise but do not have the actual amount of capital to start your franchise, you might want to consider getting help from different financing options. Aside from securing a loan through a local bank, there are also different lending corporations that specialize in franchise financing, or maybe you can try the US Small Business Administration.
Almost all dollar store franchises will be able to extend a hand and help you through all the financing options and can even recommend what’s best for your situation. However, for starters, you will still need to come up with cash to start your business, which usually ranges from around $20,000 to $50,000.
You might want to consider consulting a financial advisor that can help you build a picture of what you can truly afford and is feasible – not only the franchise cost but also including the actual business set-up.