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Are You Ready For Franchising?

Written by: Bob Macek

Article Overview: Franchising. Just saying the word has an almost soothing quality to it as it rolls off the tongue. As a concept, franchising is suppose to provide business owners a sense of comfort and ease, knowing that behind their new venture are people with years of tried-and-true business experience waiting to share it. Franchising is a business network that allows people to share a brand identification, a successful method of doing business, and a proven marketing and distribution system. But franchising isn't for everyone. In fact business owner "wannabees" should think carefully before spending many months and much cash on securing a franchise that either isn't right for them and provides no extra benefits. This article provides 5 important steps you should consider before purchasing a franchisee.

Are You Ready For Franchising?

A franchise is supposed to do one thing and one thing only and that is to reduce your risk of failure.

The No. 1 question a person should ask themselves before going the franchise route is what will they get for their money?

Depending on the size of the franchise fee and royalties, which vary greatly among franchises, a potential franchisee should be concerned about a wide range of things including: the area covered by the franchise agreement, amount of training and materials provided for managers and employees, help with advertising, equipment packages and financing options. Of all of those, financing options, can speak volumes about the company.

One should always be skeptical of franchisors who won't finance at least part of the business. It doesn't show much faith in the business or the potential franchisee. But the franchisor also wants a potential franchisee to show faith in the business and persistence in their dream of owning a business. That's part of the reason behind making an anxious entrepreneur jump through a hundred hoops, sometimes before a company will even consider a potential franchisee.

Keep the following steps in mind when you consider becoming a franchisee:

SELF-EVALUATION. Ask yourself whether you are willing to make the sacrifices of long hours, hard work and financial uncertainty needed to make a franchise work? Do you enjoy working with people? Are you a good supervisor? Or are you simply attracted by the idea of making easy money. Good franchisors will make sure you answer these questions about yourself.

INVESTIGATE THE FRANCHISE. Do what most people do when making a major purchase such as a home or car: compare. Talk to one franchisor then talk to a similar franchisor. Talk with the franchisees from the company or similar category. The Federal Trade Commission will be helpful in obtaining information on where and how to start. Their Franchise Opportunities Handbook, from which some of this information was taken, is a good place to start

KNOW THE MARKET. Drive the streets and talk to the people where you plan to locate your franchise. Look and listen for what products and services are needed and check out the competition. How the area is growing and what may be needed in the future?

READ CAREFULLY AND STUDY DISCLOSURE STATEMENTS. The franchisor is required by law to provide to the prospective franchisee an offering circular or prospectus. If they do not, then ask for one. These statements contain information ranging from a description of the business to lawsuits, previous bankruptcies, financing assistance, restriction on the goods or services franchisees can sell and training programs. After studying the statement, contact a few of the franchisees that will be listed.

OBTAIN PROFESSIONAL ADVICE. While your banker will have some helpful advice about putting together a solid business plan and other financial options, reputable legal counsel and accountants will help you evaluate your risk and opportunities.

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Article Tags: easy money, entrepreneur, federal trade commission, financial uncertainty, financing options, franchise agreement, franchise fee, franchise opportunities, franchisee, franchisees, franchises, franchisor, franchisors, hoops, owning a business, persistence, risk of failure, royalties, sacrifices, self evaluation



Related Forum Posts
Re: Re Franchise etc - [quote="bmueller47":e0j0nu4t]Can you see a shift of various types of franchises? What I am thinking about is that today it is more difficult to create franchises, that has great appeal. More and more people want to have their business, but no interference of someone else.[/quote:e0j0nu4t] Not sure what you mean exactly but it is certain that more and more people want to have their own business but not more and more people know what they really want to do, or how to do it. And that's what franchising is all about. Franchising is not for an entrepreneur. An entrepreneur will do his own thing. People who buy franchises want a turn key business, with a proven model. Franchising in the US had never been that good. I don't have the exact numbers in mind but I know for sure that franchising is growing more and more as people are getting more and more aware of this business model.
Franchising vs. Licensing? - What is your opinion on Franchising vs. Licensing? Which is better?
How can I best help you? - I'm looking forward to sharing my ideas and insights here about taking your business to the next level. Before I jump in, I'd love to find out what would be most helpful to you. So, I'd appreciate hearing your responses to: How can I best help you to take your business to the next level? What are you struggling with at the moment? What would you most like to learn? and I'll do my best in responding to you Ready, get set, go . . . Wendy
Nominations for a new Franchising Moderator! - Is there anyone you'd like to nominate as our Franchising Moderator (or volunteers for the position)?
Great Article, chock full of info. - Ian, Thank you for linking your article regarding Licensing vs Franchising. Its a good read.


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