DOLLAR TREE Franchise Startup Cost, Revenue and Profit Margin
How would you like the opportunity of owning a business that makes your clients excited and want to patronize you?
How? You might ask. Well, when such a business allows people to buy great items within the 1 dollar price-point, then it creates that excitement!
Is Dollar Tree a Franchise?
The Dollar Tree franchise is that opportunity. The Dollar Tree franchise is a strong brand that has become popular among shoppers. This is because, at Dollar Tree stores, customers get amazing items within the $1 price point!
This is awesome! But how do I make profits if I sell for a dollar? This should be the first thing that comes to mind. But wait for it; just as there are exciting deals for shoppers, Dollar Tree offers its franchisees great deals as well. The Dollar Tree franchise is the market leader for single-price-point dollar stores in America. With an ever-expanding chain of stores, Dollar Tree has over 14,835 stores.
Currently, the Dollar Tree franchise is spread across 48 states within the United States. However, this franchise opportunity is not only restricted to the United States alone, as it also has a division in Canada. Its Canadian division currently has over 227 locations. But wait, before we get distracted, we must make mention of the type of business Dollar Tree does;
The franchise operates in the retail industry. Dollar store startup packages include a chain of stores that sell merchandise ranging from cleaning supplies, books, seasonal décor, health and beauty products, toys, gift wraps, and bags, housewares, dinnerware, glassware, crafts, snacks, candy, cleaning supplies and so many more! All of these amazing items are sold under $1!
HOW TO OPEN A DOLLAR TREE FRANCHISE?
Before investing your money into any business, it is necessary to have some background knowledge. The Dollar Tree franchise was founded 32 years ago in Norfolk, Virginia. Today, its headquarters is located at Chesapeake, Virginia, US. Its founders include Dennis Edwards, Ray Compton, Macon Brock, and Doug Perry. This franchise was formerly called Only $1. Gary Philbin is its current CEO.
- Dollar Tree Canada Subsidiary
Its Canadian subsidiary is headquartered at Burnaby, British Columbia, Canada. It has 227 outlets mostly located in Western Canada and Ontario. Before its acquisition by Dollar Tree, this franchise opportunity had previously operated under the name Dollar Giant from 2001 to 2010. Within this period, Dollar Giant had 85 retail outlets in Canada and was the fourth-largest dollar store operator.
Joseph Calvano is its president. For interested investors, The Dollar Tree franchise gives you the opportunity of owning a business with a strong international brand. Its continued success both domestically in the United States and Canada has proven the brand to be reliable and convincing enough for investors to commit their investments.
- Operating Revenue
As mentioned earlier, the Dollar Tree franchise is a leader in the single-price-point retail sector. Its 2017 financial statement revealed revenue of USD$22.246 billion and total assets of USD$16.333 billion. Its net income was put at USD$1.714 billion. Dollar Tree had total equity of USD$7.182 billion. It is currently traded on the US stock exchange.
How much can I make as a Dollar Tree Franchisee?
All too often, this question is raised among prospective franchisees. We believe you will be very interested in this as well. This is because every business is expected to make profits. While buying a business is an interesting venture, it is important to have realistic expectations.
Why? This is because many franchise owners start with an unrealistic picture of how much profits they should be making. As a Dollar Tree franchise, you need to take note of the following;
- You Should Be Preoccupied with the Bigger Picture
Owning a franchise means you have a business to supervise and run efficiently. The top performers among franchise owners have constantly shown that their goal is not all about the money. It is mainly about growing or increasing the value of the business. This should be your target as well. As your Dollar Tree franchise grows, your equity automatically grows as well.
Franchise owners always have an exit plan. This is because ownership normally has a term limit. Some franchisors have renewable ownership while others have a fixed term. Whatever the case is, it is necessary to build the value of your franchise. This allows you to eventually sell at a profit. As a unit owner of a franchise, there are sometimes gross sales figures. These are provided for in the franchise disclosure documents.
- Do not be Carried Away by Impressive Numbers
Top-line revenues can be misleading. Although franchise posts impressive top-line numbers, you should be more concerned with the profit margin. This is normally what you have left after expenses must have been paid. Yes! Every business has bills to be paid. It all boils down to how well your franchise unit is managed.
One of the most effective strategies for increasing profits is by reducing running costs and increasing efficiency.
Size doesn’t matter here. The most important thing is that your business poses a decent profit margin. Only this will positively impact on your income/profits. Franchise Business Review researched the income of franchisees according to industries. Retail sector franchisees earned an average pre-Tax income of $60,405.
- You are a Separate Entity from your Business
What does this mean? Just that! Here, a lot of franchise owners mistake their business’ bottom line as their own. This simply means that profit from the business is mistaken for personal income. There are bills and obligations to pay. These include federal, state, and local taxes, accruable loans and debts, and recurrent as well as capital expenditure.
These may include equipment maintenance, building, and other assets. Where will the money come from to take care of these? The profits made by the business. You are the last to get paid in the scheme of things. Don’t forget that you will have a wage bill as well. All of these will influence how much you make as a Dollar Tree franchisee. So you will have to run your business efficiently and diligently.
How Much Does a Dollar Tree Franchise Cost?
This is where you get to know how much you need to pay for a Dollar Tree franchise. As with any other type of franchise, Dollar Tree has its financial requirements. Dollar Tree requires prospective franchisees to pay a franchise fee within the range of $20,000 to $30,000.
Also, a total investment fee within the range of $25,000 to $300,000 is required.
The size of your Dollar Tree franchise influences how much you will have to pay in franchise fees and the total investment costs. The larger the unit, the more you will have to pay. There are also costs of ongoing royalties you will have to pay. This is disclosed in the franchise agreement you will be presented with by the franchisor. Before commencing the application process, it is necessary to contact the franchisor.
In most cases, Dollar Tree may alter some of its requirements to fit current realities. Hence you must find out if there are any.
Factors that Influence Profitability
Every business is intended to make profits for the owner. Dollar Tree franchisees are drawn by the sound business model and profits the franchise promises. This is also backed by its decades of success in building a respected brand in the retail sector.
However, certain factors influence profitability. You need to know these to increase your chances of success with your Dollar Tree franchise. These include;
- Business Location
Dollar Tree franchise encourages the choice of ideal locations for its stores. These are normally smaller areas within low-income communities where foot traffic is high. These locations impact on overall profitability.
Also, multiple Dollar Tree franchise units can be opened to serve more areas within the community. Your level of success will determine how profitable your Dollar Tree franchise unit is. This is because the more ideal the location, the more patronage you will attract.
This is of utmost importance to the success of the business. As a Dollar Tree franchisee, the company helps with marketing by providing national and regional advertisements. Other forms of marketing include email marketing, social media marketing among several others. These marketing measures help in spreading the word about the business, and through this, creating awareness.
Your level of hard work as a Dollar Tree franchisee significantly increases your profitability. When you are driven by the right reasons (such as a determination to succeed), your chances of success are significantly increased.
- Multiple Dollar Tree Units
The more Dollar Tree units/locations you own, the higher your chances of success. Dollar Tree allows its franchisees to own several units. This largely depends on their level of commitment to growing the business. Having multiple units is a testament to the fact that you have succeeded in expanding your business to cover more locations. The more the number of units, the higher the patronage you get. Also, higher patronage translates to good profits.
You get to the opportunity of owning a solid brand that gives you the power to grow your business. This is backed by its solid business model and a track record of excellence that has sustained and expanded the business over several decades of its existence. An exciting thing about this aspect of its business is that you are part of a larger brand with an international presence. The goodwill and trust the company has built over the years benefit you as well.
Dollar Tree’s Franchisee Preference
The Dollar Tree franchise is one that is careful in the selection of its franchisees. This is because the more qualified the franchisees are, the greater its level of overall success. Therefore, greater preference is given to franchisees who have worked as Dollar Tree employees before. This is because this group of prospective franchisees has a greater level of experience regarding how things are done.
Training for this group of individuals has a greater impact. The cost of training is also significantly reduced. This preference for active or former employees has led to its success but domestically and internationally. So, what if you are interested in owning a Dollar Tree franchise but do not meet its description? You will have to adhere to its guidelines by following the right procedures.
What is the right procedure? You simply need to get employed in any of its franchise outlets. However, getting employed is not enough. You have to rise through the ranks to eventually hold a management position. Being a manager is ideal. Here, you get to learn all about running the day to day activities of the franchise. You are likely to advance faster if the Dollar Tree franchise owner has multiple locations.
This allows you to either be relocated to manage another of its unit or you are assigned to replace the existing manager while he/she is redeployed. The minimum length of time you are expected to spend as a manager is one year. After this period, you are given the opportunity of applying for a Dollar Tree franchise. Before then, you are expected to have raised the funding required to invest in the franchise opportunity.
How Being a Dollar Tree Franchise Employee helps you
There are times when the requirement for becoming an employee seems confusing to prospective franchisees. Well, this is not rocket science! This strategy is meant to increase the chances of your success significantly. It is also a strategy used by the franchisor to help mitigate losses through inefficient management. As an employee involved in management, you get to encounter challenges and also overcome the same.
Owning your Dollar Tree Franchise will only make it much easier as your experience can be easily brought to bear in tackling unforeseen challenges that may arise. You also get to realize if you are truly cut out for the challenge.
If you love the job, chances are that you will succeed with your franchise. It allows you to reflect on what you truly want and if what you do can be replicated with success in your business.
In running a Dollar Tree Franchise, you need to know that more startup costs will be required. This is higher when compared to other types of franchises such as home services. Your business will have to target low-income neighborhoods. This is where your services will be most appreciated and patronized. People living in low-income neighborhoods are interested in the smallest difference in price points.
This means a lot to them because they never get to enjoy the benefits of bigger retailers who prefer larger cities. As a Dollar Tree franchise owner, you are less prone to face competition from eCommerce businesses because they mostly do not consider this area of retail business.
Important Questions you Should Ask
While running a franchise can be exciting for many, this may not be the same for everyone. You need to know what drives your interest. Here, your needs, goals, and vision will reveal a lot about why you need to buy this franchise opportunity.
Before making up your mind to invest in a Dollar Tree franchise, you need to ask yourself some important questions. These questions include the following;
- What do I Seek in This Business?
This requires some serious thought. As simple as this question seems, carefully reflecting and thinking about it can reveal a lot to you. You get to query your mind about what your needs are and how best this business fulfills or meets those needs.
Having thought about this and obtained satisfactory answers, you will then need to compare available information concerning your expectations and if these expectations will be met or not.
- How Much Do I have to Invest?
This is very crucial is of starting any business including owning a Dollar Tree franchise. The answers you get will determine from the onset if you are qualified to still pursue an investment in this company. You need to have an immediate answer to how much you can come up with as well as comparing this figure to what is required.
If the investment required is more than what you have, you will have to look for ways to generate more funding. This may involve postponing the investment until such a time when you would have obtained the necessary funding.
- Would I Enjoy Doing this Business?
This has been mentioned briefly earlier. However, this is as important as it can get. Getting into a business for the wrong reasons can be fatal to growth and sustainability. You should be able to enjoy your job if you wish to perform creditably well. Anything short of an affirmative answer to this question is a red flag that you should pull out. You will save yourself the stress of having to labor through its daily running and also the negative feeling that comes with failure.
- How Much Does a Dollar Tree Franchise Make?
Before we start a business, we all have a range of profits we expect to make. This is largely estimated through informed guesses. Hence you need to ask yourself if the profits promised by Dollar Tree franchise meet your expectations. If not, many other franchises may meet such expectations. Hence, it is better to simply pull out if your expectations are not met.
- What are the things I like and those I Dislike about Dollar Tree Franchise?
No matter how much you love a particular business, there are some little things or aspects of the business you dislike. Before investing in a Dollar Tree franchise, you must identify these likes and dislikes. This enables you to know how best to manage the two. When you notice that there are more dislikes than the likes, then it is a signal that this franchise might not be the opportunity you seek.
On the other hand, when the likes are more, then it means that you can tolerate the dislikes and force ahead. This is something you should deal with before committing yourself to a contract. Knowing this early enough allows you to easily disengage and seek better options elsewhere.
- How is my Time Affected? Does it Allow Me to do other things Outside Business?
There are franchise opportunities that take up your entire time. Those most notorious for this are franchise opportunities that disallow absentee ownership like the Dollar Tree franchise. You will need to know this to find out if you’ll be cool with it or not. If you are up to the challenge, then, by all means, you should go for it.
However, some would not want to work 7 days a week. They may require a day off to wind down. You need to find out every detail about this before making up your mind. It helps guard against unwanted situations where you may feel trapped and used.
Finding Answers to Your Questions
Before signing the franchise agreement, you will meet and speak with the franchise owners. This should serve as the opportunity to ask and discuss all grey areas. Dollar Tree franchise gives you all the information you need regarding ownership and profit-sharing among several other vital areas of doing business.
It is also necessary that before signing the franchise agreement, you get legal input on the matter. This helps guide you on the paths to avoid as well as questions or areas you may have overlooked.
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The information we have provided on the Dollar Tree franchise has focused on providing as much knowledge as we can on what is needed and what to look out for when applying for this franchise opportunity. You mustn’t rush the process, but take time to fully understand how it runs as well as what is required from all franchisees.
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Knowing this beforehand helps you in your quest to own and operate a Dollar Tree franchise successfully without any problems. It is believed that you should have little or no problems with your dreams of owning a Dollar Tree franchise from here on.