You have two big decisions to make when deliberating over whether to use a franchise opportunity to set up a business. If you have already determined that a franchise may be the way to go for you then you have to choose the right one, but how can you do that?
First, you have to analyze yourself in depth to ensure that you have the personal skills, wants, and needs. You have to know exactly what you are capable of and the extent of your business aspirations. Brainstorming is a handy tool to use in this situation and it is essential that you do so before investigating current franchise opportunities that are available. Starting with industry analysis is the best route because you can then match your skill set to the industry requirements. As such, you can then narrow down your options to a few select industries before assessing whether those franchise options would work in your local geographic area. Only then can you begin to contact the franchisors and create a business plan.
When contacting franchisors about possible opportunities, always ask them to send you franchise information. If they are to be trusted then this should be available at no cost. When you receive the information, be sure to read it extremely carefully, paying attention to every detail. Do not take anything at face value and research every detail given in depth. After all, this is your future and no stone should be left unturned. You can use trade magazines, Internet profiles, professional journals, and annual reports. You should also contact the Federal Trade Commission (FTC) and local authorities to make sure that there are no issues with the franchisor. You should extensively look into the reputation, financial health, growth, management, and day to day running of the business because it will be passed onto you as a franchisee.
When you have digested all of the above information and you are happy with it, ask for details of existing franchisees. It is essential to speak to them because they can give you an accurate viewpoint of how the franchisor runs the business, what the management is like to deal with, insider secrets, how the business is faring, and so on. Any good franchisor will be more than happy to provide this information whereas others may be reticent. Franchisees provide critical information so again only pursue franchises that are accessible. Only then should you assemble a legal team and accountant to answer any legal and financial questions you may have. They will also be able to find any holes that you have yet to discover, thus protecting your own interests.
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Tag: right franchise
Where other businesses struggle, franchise businesses thrive. Wendy’s and McDonald’s are prime examples of successful franchise businesses, and also provide inspiration for those individuals who really want to form their own successful businesses in the future. With a brand behind you and a good idea of what does and does not sell, it is no wonder that you have chosen to consider a franchise.
There are two types of franchises out there. One is the good franchise that takes care of its franchisees, providing training and support throughout. The second type does nothing but take from the franchisee and pushes for profit. There is a third type of franchise and that is the one that will rip off franchisees, taking them for as much money as possible. The latter two are not worth the time, money and energy, whereas the former is extremely desirable.
As such, it is essential that you do your research and investigate a franchise thoroughly before signing a contract or paying out any money. The list of questions below may help you to find the better ones as the answers they will yield will give you enough information to make an informed decision:
1. Have you and your attorney analyzed the franchise agreement in detail and do you both completely agree with the details?
2. Are there any elements or step required of you that would break the law or be to the detriment of yourself or your country?
3. Do the provisions in the franchise agreement give you exclusive territory for the period of your contract? If not, what is the maximum number of franchises that may open in your area?
4. Is this franchisor connected in any way with any other franchise company handling similar products or services?
5. If you answered yes to the above question, what is your protection against the second franchising company?
6. If you decide to end the franchising contract for any reason, what are the provisions for you to pull out of the contract and how much would you have to pay to break the agreement?
7. Are you able to sell your franchise during or at the end of your contract? If you are legally allowed to do so, what are the repercussions related to compensation?
8. What time period represents the duration of your contract and how long has the franchisor actually been in full operation?
9. Does the company offering you this franchise have a reputation for honesty and fair dealing among its franchisees?
10. Has the franchisor shown you any certified figures indicating exact net profits of one or more of its members, and have you personally checked the figures with these people?
11. Are you able to tap into franchisor assistance with training, PR, advertising, capital, credit or merchandising?
12. Are you offered assistance for finding the best location possible in your chosen area?
13. Does the franchising firm have solid financial input to ensure stability and the establishment of goals?
14. Does the franchisor have experienced management, trained in-depth?
15. Can the franchisor do anything above and beyond what you are capable of yourself?
16. Have investigations into your background been carried out and has the franchisor been assured that you are capable of making a profit?
17. Does the state in which you live in have franchising laws in place, and does the franchisor adhere to them completely?
18. How much equity capital will you need to purchase the franchise and operate it until your income equals your expenses?
It is extremely important to answer these questions fully and to your complete satisfaction. If this is the case then you may be extremely eager to become a franchisee. However, you should research all answers to get them verified in several places to ensure that your investment would be a wise one.
Purchasing a franchise can provide you with stability and profits in a short period of time but that is not to say that it is infallible. Less than 20% of all franchises fail so you need to ensure that you do not become a statistic. Information regarding specific franchising ideas can be found in the franchising directories, which are generally available at the local library. This will give you a little assistance to get started but you need to ensure that you are completely happy before committing.
About the Author:
GlobalBX provides a FREE business for sale exchange connecting business buyers, sellers and lenders. Search over 32,000 businesses for sale and franchise opportunities. Sell a business for free with no listing fees and zero commissions. We have all the top franchises as well as franchise resales. Find franchise reviews and get free franchise information. You can also contact over 300 lenders directly and get a business loan.
Franchising has a longer history than many people may imagine but there have been several defining moments during its history. One of the biggest events occurred on October 21, 1979 when the Federal Trade Commission (FTC) introduced the Franchise Rule. This was designed to protect franchisees because it asserted that all US operational franchisors were legally obliged to fully disclose details that all potential franchisees should know before committing to investment.
As such, it enforced FTC standards to ensure that all disclosures contained uniform information that has been prepared to meet the legal criteria. One of the main requirements of this law ensured that there has to be evidence to support any financial details given. This in turn assures all potential franchisees that there is profit to be made and make them fully aware of any pitfalls.
More specifically, the Franchise Rule requires the following information to be disclosed by all franchisors:
(a) The franchisor must declare its affiliates, directors, officers, management and individuals responsible for all areas of the business, such as training, support, and franchising information.
(b) The franchisor must declare whether it or any of its officers, management, and directors have ever been bankrupt or faced lawsuits in the past, even those from before the individual in question joined the business.
(c) The exact amount you are expected to pay in franchise fees and various other associated charges must be disclosed. This includes all immediate and ongoing payments after the franchise contract is signed and the business has opened.
(d) Any and all restrictions on the quality of goods and services that you, as a franchisee, may use. This includes any purchase restrictions that may be in place.
(e) Any help and support that will be offered by the franchisor and any affiliates including financial support.
(f) All restrictions applicable to the goods and services you will be managing and selling, as well as any restrictions that you have to work with when dealing with customers.
(g) Any advantage or guarantees provided regarding the location and locality of the franchise.
(h) The franchise conditions under which your franchise may be terminated, sold on to another franchisee, repurchased, or modified.
(i) Franchisee training programs that are available and any fees associated with them.
(j) The involvement, if any, of celebrities or known figures in the public eye within the business, whether in advertising or behind the scenes.
(k) Site selection assistance that is offered by the franchisor.
(l) The number of present franchises, franchises projected for the future, franchises terminated or not to be renewed, and the number repurchased in the past.
(m) Full financial statement disclosure.
(n) How far you are expected to participate within the franchise operation after becoming a franchisee.
(o) Full disclosure of proof for earnings and profit claims made regarding other franchisees.
(p) Full names and addresses of franchisees that you can talk to.
All of the above legal considerations of franchising must be fully disclosed during initial contact with the representative of the franchise, whether that is a broker or the franchisor him or herself. As soon as the franchise opportunity is discussed, the legal considerations must be fully disclosed. The disclosure must be at least ten days prior to payment or to any franchise or related contract being signed. This pertains to the contract signing itself and also any financial statements changing hands.
The Federal Trade Commission does not require franchisors to register, but depending on the state your franchise may be in, it may have to register on a local level. The Uniform Franchise Circular Offering (UFOC) guidelines have been adopted by most states as a result of their strict disclosure requirements. However, you should never take it for granted that the franchise is registered or offers full disclosure, thus providing you with protection of any kind. You must research the franchisor fully before committing.
About the Author:
GlobalBX provides a FREE business for sale exchange connecting business buyers, sellers and lenders. Search over 32,000 businesses for sale and franchises for sale. Sell your business for sale for free with no listing fees and zero commissions. We have 1000s of franchises as well as franchise resales. Find franchise reviews and get free franchise information. You can also contact over 300 lenders directly and get a business loan.