What You Should Ask Before Buying a Franchise
What You Should Ask Before Buying a Franchise
Consider asking the following ten questions:
1) Is it a “package franchise” or a “product franchise”? The majority of franchises are “package franchises” – businesses such as fast-food restaurants, muffler shops or motels that come complete with a laid-out business model covering everything from financial controls to hiring guidelines. “Product franchises,” on the other hand, include businesses such as car dealerships and gas stations that exist primarily to distribute the parent company's goods. Understandably, product franchise owners have more control over how they run their businesses than package franchise owners.
2) Does the business lend itself to the franchise model? For example: fast-food businesses greatly benefit from their associations with the brand name and products of the franchisor. Don't take it for granted that this holds true for another kind of business, such as, for example, a car wash.
3) Take a look at the offering circular: What does it say? According to the Federal Trade Commission, franchisors are required to provide prospective franchisees with an offering circular that contains basic facts about the company. Be sure to read the UFOC document; it contains invaluable information about the firm's legal history, business experience and other franchisees.
4) What is the number of franchisees in the organization? The more franchisees there are, the more successful and established the business is. Be aware, however, that if a firm's other franchises are located near yours, you could end up competing with a nearly identical business.
5) What's the franchise fee? According to the International Franchise Association, 95 percent of franchise fees were less than $40,000 as of 1996. However, you could end up paying more for a franchise affiliated with a blue-chip national chain.
6) How much will you end up paying in royalties? Generally, franchisors charge royalties equal to 3-6 percent of each franchise's revenues. However, some firms charge much more, and still others charge flat fees on an ongoing basis.
7) How much money will your business bring in? Usually, the parent company's projections are optimistic. Franchisees may have different opinions, however – the UFOC will tell you how to get in contact with them.
8) Are these people you can work with? Franchising is a long-haul kind of commitment, and quite expensive, too – so you'd better get along with your bosses. Visit the company's home office, regardless of how far from you it is, and ask other franchisees about their experiences with the parent company.
9) How is the franchisor going to help you? A franchisor may negotiate a lease, select a site for your business, advertise for / interview prospective employees, finance the franchisee fee or equipment costs, get business licenses, or provide other services. What will your franchisor do for you? Get it in writing.
10) How legitimate is the franchise company? Occasionally, franchisors will try to bilk new entrepreneurs. Look to other franchisees, the FTC, and the Better Business Bureau to determine just how legitimate your franchise company is.
What You Should Ask Before Buying a Franchise - To learn more about this author, visit Sebastien Page's Website.
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Buying a franchise means putting big dollars on the line, and, for better or for worse, your success doesn't entirely depend on you – the quality of the company behind your franchise also matters. It is therefore important to learn as much as you can about the parent company before you make an investment.
Consider asking the following ten questions:
1) Is it a “package franchise” or a “product franchise”? The majority of franchises are “package franchises” – businesses such as fast-food restaurants, muffler shops or motels that come complete with a laid-out business model covering everything from financial controls to hiring guidelines. “Product franchises,” on the other hand, include businesses such as car dealerships and gas stations that exist primarily to distribute the parent company's goods. Understandably, product franchise owners have more control over how they run their businesses than package franchise owners.
2) Does the business lend itself to the franchise model? For example: fast-food businesses greatly benefit from their associations with the brand name and products of the franchisor. Don't take it for granted that this holds true for another kind of business, such as, for example, a car wash.
3) Take a look at the offering circular: What does it say? According to the Federal Trade Commission, franchisors are required to provide prospective franchisees with an offering circular that contains basic facts about the company. Be sure to read the UFOC document; it contains invaluable information about the firm's legal history, business experience and other franchisees.
4) What is the number of franchisees in the organization? The more franchisees there are, the more successful and established the business is. Be aware, however, that if a firm's other franchises are located near yours, you could end up competing with a nearly identical business.
5) What's the franchise fee? According to the International Franchise Association, 95 percent of franchise fees were less than $40,000 as of 1996. However, you could end up paying more for a franchise affiliated with a blue-chip national chain.
6) How much will you end up paying in royalties? Generally, franchisors charge royalties equal to 3-6 percent of each franchise's revenues. However, some firms charge much more, and still others charge flat fees on an ongoing basis.
7) How much money will your business bring in? Usually, the parent company's projections are optimistic. Franchisees may have different opinions, however – the UFOC will tell you how to get in contact with them.
8) Are these people you can work with? Franchising is a long-haul kind of commitment, and quite expensive, too – so you'd better get along with your bosses. Visit the company's home office, regardless of how far from you it is, and ask other franchisees about their experiences with the parent company.
9) How is the franchisor going to help you? A franchisor may negotiate a lease, select a site for your business, advertise for / interview prospective employees, finance the franchisee fee or equipment costs, get business licenses, or provide other services. What will your franchisor do for you? Get it in writing.
10) How legitimate is the franchise company? Occasionally, franchisors will try to bilk new entrepreneurs. Look to other franchisees, the FTC, and the Better Business Bureau to determine just how legitimate your franchise company is.
What You Should Ask Before Buying a Franchise - To learn more about this author, visit Sebastien Page's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Staging DivaDebra Gould, aka The Staging Diva®, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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