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Six “Must Haves” for Buying a Franchise

Written by: Tom Parsley

Article Overview: We all know that buying a franchise is a great way to start a new business. Yes it’s true that the initial cost of a franchise is generally more than any non-franchised new business. But overall, franchises are much more successful in both the near-term and long-run than individual businesses. But before you buy a franchise, consider these six "must haves" to ensure you are successful.

Six “Must Haves” for Buying a Franchise

We all know that buying a franchise is a great way to start a new business. Yes it’s true that the initial cost of a franchise is generally more than any non-franchised new business. It makes sense that a franchisor would need to be rewarded (both initially and on an ongoing basis) for their training, assistance, consultation, and guidance. And, remember, the franchisor is allowing you to use their proven business model for your own personal gain.

But generally, in the long run a franchise can be much less costly to start and grow than a non-franchised business due to operating efficiencies, defined processes, and the advertising clout that the franchise name carries. Furthermore, many studies have shown that the success rate of a new franchise five years down the road will far exceed that of any new non-franchised business.

So even though franchises are a great way to start a new business, there is still that level of uncertainty that hovers over any new business venture. Is it really worth taking the risk?

Yes – if you have the following six characteristics:

1) Time. If you thought you were working a lot of hours at your regular 40 hour per week job, be prepared to commit a tremendous amount of time to your new venture.
2) Energy. Not only will you have to commit the time necessary, your energy level will need to be at peak level all day. You will be busy, and you will need to set an example for others. Can you do it?
3) Resources. You will need to surround yourself with good quality people. Management, staff, accountants, attorneys, vendors, suppliers, human resources, etc.
4) Skills. Do you really know what you are doing? Is your new franchise relative to your prior work experience? Do you know the industry inside and out?
5) Capital. Do you have the necessary capital required by the franchisor to pay the franchise fee, purchase assets, and provide sufficient working capital?
6) Desire. Is this really what you want to do? This is a financial but more importantly a life changing decision. It is not a decision where you can easily change your mind once you get started. Most likely it is a decision that will affect your life 10, 15, or 20 years down the road. Talk to others around you; your spouse, your kids, your friends. Make sure everyone is on board. Do you have the passion?

If you want to buy a franchise, consider the six points above. If you can pass the test, then you will likely succeed. Good luck!

Related Articles
  Why People Buy
  Buying A Franchise
  Franchising with all its Success
  Reselling Your Franchise
  Things to Watch Out for When Buying a Franchise

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Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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