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What exactly is a franchise?
A franchise is a written agreement between a company that has a system in place and another party in which the company provides you, the franchisee, with the right to use the firm's name, products, systems, logos and a myriad of other tangible and intangible things or products within the scope of a franchise agreement.
What is franchising??
The act of Franchising involves two or more parties or individuals. The franchisor owns the product, services and systems offered for sale and the franchisee or purchaser buys the right to use a trademark in their own business using the name of the franchisor, logos, systems, concepts and more as provided in the franchise agreement. Franchising offers the franchisee the freedom to exercise the powers of a corporation through the operation of one’s own business.
Why franchise a business?
Franchising enables business owners to sell products or services with trusted brand name recognition. Other franchise benefits are access to various support services like location research and real estate assistance, access to capital in the form of loans, start-up assistance, marketing assistance, and training in how to run the business, management advice and the foundation and experience established by the company not to mention other franchise owners within the company.
What are the rewards of franchising?
The franchisor has proven the business model, offers training, enables licensed agents to establish their own business with little experience drastically minimizing the risk of ‘going it alone’. Many franchisors have operated their business successfully before they began to franchise it to others.
Why should I buy a franchise instead of starting my own business?
According to the Department of Commerce, 90% of all new businesses fail each year. These are staggering statistics but the grim reality never the less. Franchisees have a higher rate of success due to the brand name and reputation behind their products and services. A ‘Tried, Tested and Proven’ way to do business using a successful business model that is replicated to achieve similar results drastically reduces risk.
What should I be looking for before buying into a franchise?
The Uniform Franchise Offering Circular commonly known as the “UFOC” pronounced “UFOK” of the franchisor is a document required to be registered with many state and federal agencies. In it you will learn many important facts about the Franchise you are interested in. You should also research the level of experience needed to own and operate the business, as well as the time commitment you must invest in the business on an ongoing basis. You should also research the franchisors failures and successes; compare the franchisor to others in the same industry looking for “Your Best Fit”. It is also important to understand the terms and conditions of the contract and review the financial condition of the franchisor before signing on the dotted line.
How do you determine the success rate for a franchised business?
This is where asking lots of questions come into play even more. When establishing a business plan, a franchisee should consider both the support from the franchisor combined with the dedication and hard work needed to construct a blueprint for a successful business. Talking to other Franchise owners helps you determine how the business is doing as well.
How much does a franchise cost?
There are no fixed prices for any particular franchise opportunity. However, franchises do compete with each other and often base their franchise fees on a “Market Bear” approach to setting the price. Depending on your budget and financial wherewithal, there are franchises to suit most people ranging from few thousand, to over a million dollars.
How do I raise the funds required to buy a Franchise?
There are as many ways to raise the money to purchase a Franchise as there are ways to buy most anything. Many people use their savings. Some borrow money from relatives or banks. There are also investment “Angels” that have money to help people get new businesses going. Most banks have lending departments that specialize in helping potential franchisees. In many cases the franchisor has done the hard work for you and arranged special terms with lending institutions or may have in house lenders to assist you.
How do I know which franchise is right for me?
This is both difficult and easy rolled into one. Many pages could be written about this very topic. People like doing certain things. Some get excited about making coffee others with making other forms of fast foods. Still others love repairing things or installing products. The best franchise for you is not necessarily the one that makes the most money or is most profitable! Buy a franchise that suits your lifestyle and that you find interesting. Face it…if you like the products that you are marketing, then you are much more likely to enjoy your work and make more money!
Can I sell my Franchise Business if I want to?
Yes, most likely so. If your franchise business is operating profitably, then you should be able to sell it like any other business. Your franchise agreement, “UFOC”, will go into details regarding selling your business. Understandably, if your franchise business is not operating at a profit, it will be much more difficult to locate a buyer.
What type of legal advice should I look for when buying a franchise?
It is always a good idea to review your “UFOC” with a competent attorney experience in dealing with franchise law. Most states have a legal referral service that will assist you in finding a lawyer in your area that will review your franchise agreement and make sure it is fair not only for the franchisor but you as well.
