Dollar Store Franchise Information
Dollar stores are retail stores that sell items for a set price--usually $1. These stores have been around for more than a century, originally known as "five and ten" or "nickel and dime" stores. Today, the stores exists as dollar stores and exist to provide customers with affordable options for everyday items.
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Getting Started
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Dollar stores, much like fast-food restaurants such as McDonald's or Subway, are operated locally by franchise owners. While there is a corporate headquarters for the dollar store company, local owners operate the locations and pay to establish the store, hire employees and run the day-to-day operations of the store. The initial investment amount varies from the different stores, but on the average, at least $50,000 in liquid capital, or available cash, is necessary to start a dollar store franchise, as of 2010.
Dollar Store Brands
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Several corporations exist solely to provide franchisees with the opportunity to run and operate their own dollar stores. Among these are MCN Dollar Store Developers, My Dollarstore, Inc., The Great Canadian Dollar Store, Dollar Tree, Dollar General, Family Dollar, Deal$, Fred's, 99 Cents Only Stores and Galloway Dollar. The corporations list the required information for opening a dollar store on their websites and several offer online applications. Potential franchise owners may enter their financial information to speed up the approval process.
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Required Capital and Investment
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Dollar store corporations require that potential franchise owners have a certain amount of liquid capital and are willing to commit to a certain level of investment before awarding a franchise. The amount varies from store to store, but on average, the minimum amount of liquid capital is $50,000 and the minimum investment is $125,000, as of 2010. Some dollar store franchises also require a potential franchise owner to have a certain net worth, usually $100,000. This protects the dollar store corporation from opening stores and awarding franchises to owners who cannot meet the financial demands.
Franchise vs. Ownership
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Although all dollar stores are considered franchises, ownership terms vary from corporation to corporation. For example, MCN Dollar Stores, Inc. offers franchise owners the ability to own their stores; owners control all of the income and payments for their stores. In contrast, My Dollarstore, Inc. maintains ownership of their franchise stores and requires franchise owners to pay 4 percent of gross monthly sales to the parent company.
Store Build-Out
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All dollar store companies, as part of their franchise agreements, assist franchise owners in the build-out of new stores to ensure that each franchise location has a similar look and feel. The level of assistance varies from company to company but, in general, the franchise owner receives assistance in building out a new store location, signage for the store and setup to begin hiring employees and advertising. The level of involvement following the build-out also varies, but the dollar store company will keep the franchise owner abreast of any changes, new products or new company directives in an effort to keep the chain uniform.
Products
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The goods sold at dollar stores are either generic products or products purchased from retailers that are discounted or discontinued, allowing dollar stores to sell products for low prices.
The dollar store company manufactures its own generic products and distributes them through its franchises. The products cost less because they do not have brand labels and use cheaper ingredients or manufacturing processes to decrease cost.
The dollar store company purchases discounted and discontinued products from retailers that are desperate to move their products and are thus willing to accept lower prices. A prime example is sports-related products that were designed for a specific event such as the Olympics or a Super Bowl and are no longer in demand once the event has concluded. The retailer will sell its extra merchandise to dollar store companies, which then pass the discounted products to franchise owners to sell for $1 or another low price.
Variety Pricing
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Although many dollar stores showcase a price in its name--from "Dollar" to "99 cents"--many offer products at different pricing, which is referred to as variety pricing. The dollar store will offer most of its products for $1 but also offer products at different price points, usually $2 or $3 to remain in line with the store's purpose of selling goods cheaply. However, some dollar stores, including My Dollarstore, Inc, are experimenting with offering items for as much as $15 to compliment the $1 inventory.
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References
Resources
- Photo Credit One Dollar - variations of Crumpled dollar image by PaulPaladin from Fotolia.com
