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The Franchise Question

Guest post by: Betty Penny

Article Overview: The question of whether or not to purchase a franchise plagues many new and established entrepreneurs. For some it seems like an east indoctrination to the world of being your own boss. For others, it appears as an opportunity to get in on a good thing without the risk of being an owner/operator and putting other business ventures at risk.

The Franchise Question

The question of whether or not to purchase a franchise plagues many new and established entrepreneurs. For some it seems like an east indoctrination to the world of being your own boss. For others, it appears as an opportunity to get in on a good thing without the risk of being an owner/operator and putting other business ventures at risk.

Ask around. I guarantee that for every good reason to become involved in a franchise, you’ll probably hear as many reasons for staying away. In Canada, we are fortunate to have the CFA – Canadian Franchise Association. For over 40 years this group has been monitoring the state of franchising in Canada. According to what one reads in the latest press, this organization is fashioning itself after the self-regulators found in other industries.

But the credibility that comes with a company’s membership in the CFA should not be the sole determining factor in whether or not you buy into a enterprise. It isn’t necessarily the easiest route. Start your soul searching with an honest, objective look at you.

Are you knowledgeable about the area or product a particular franchise specializes in? You should be. Simply because a parent company is established isn’t enough to guarantee your success at selling the product or service. Also, consider your personality type. In any work environment if you have had trouble taking orders or following rules, franchising may not offer the freedom you anticipate. Some parent companies have very ridgid systems that all franchisees are expected to follow.

Do you have some financial know-how? Many will mistakenly think that they have a safety net in a franchise and can learn on the job. Not so. Like any foray into self-employment, a potential franchisee should properly research start-up requirements and financing options, as well as anticipated income. Can you continue to support yourself as in the past? Your family? Will there be enough left over to weather a rough ride either personally or professionally? The big name doesn’t always guarantee profits: a number of factors, location and seasonality to name a few, will come into play and demand close security.

Does the business suit your lifestyle? This is something very difference from suiting your personality. You’ll have to address how you love and family factors such as childcare needs. For instance, a doughnut shop will require different hours from a bar and grill or a retail outlet. Do you want to give up your weekends? That may be a given Best to give it some serious thought before signing. What rights, as a franchisee, are you prepared to relinquish to the franchiser? Especially if you have experience in running a business, you should be asking some tough questions up front.

What is the company’s history in terms of growth? Is there a growth strategy? Will you have input? Some may be content to relinquish these rights, especially if their acumen in these areas is lacking. But a franchise is not the place to learn on the job. If the franchiser does not have a solid picture of the future what do you supposed will become of your future?

If you are feeling a little intimidated at this point, don’t be. There are many professionals trained to provide the advice you need in order to make an informed decision. A lawyer and an accountant trained specifically in the area of franchising should be at the top of your list of people to call once you have considered all the questions posed here.

Next, try talking to current and former franchisees. These people can give you first-hand information about the ups and downs they have experienced. If all the news has been good to date but there is bad news on the horizon, it will become apparent during this leg of the research.

Good luck with the research and if you so choose, your foray into the world of franchising!

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Article Tags: being your own boss, business ventures, franchise question, risk



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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