Personal living expenses refer to the individual costs a franchisee incurs to support their basic daily life, such as housing, food, utilities, transportation, and insurance. These expenses are not part of the business's operating costs. In franchising, personal living expenses are important to consider separately from startup or ongoing franchise costs.
In the franchise context, personal living expenses are the non-business costs that a franchisee must cover from their personal income or savings while they are launching and operating a franchise. These include rent or mortgage payments, groceries, transportation, healthcare, insurance, education, and other costs associated with maintaining a reasonable standard of living. These expenses are not factored into the franchise’s itemized investment costs in the Franchise Disclosure Document (FDD), but they are crucial for assessing a franchisee's financial readiness.
Since most new franchises take time to become profitable, franchisees should ensure they have sufficient funds not only for the business investment but also for their personal living expenses during the startup period. Failing to account for this can put financial strain on both the franchise and the individual, increasing the risk of business failure or personal hardship. Franchisors often advise prospects to set aside 6 to 12 months of living expenses in addition to the franchise investment.
Additional Definition: The amount of money required for you and your family to live. Also called “Family Expenses.”
Learn more about franchising in The Educated Franchise - 3rd Edition
While personal living expenses have always been a practical concern in entrepreneurship, their relevance in franchising became more formalized with the standardization of franchise disclosures under the FTC Franchise Rule. Although not part of the required investment disclosures in the FDD, reputable franchisors and franchise consultants often emphasize the importance of these expenses in candidate evaluations and financial planning.
Some franchise coaches and advisors use worksheets or tools to help prospective franchisees calculate their monthly household budget. The growing emphasis on financial transparency and suitability in franchising has made planning for personal living expenses a critical step in pre-qualification and franchise onboarding processes.
Personal living expenses are essential costs that franchisees must plan for separately from business-related investments, especially during the early months of ownership when the franchise may not generate enough income. Proper budgeting for personal living expenses helps ensure financial stability and increases the likelihood of success within the franchise system.
