Is a franchise right for you?

Buying or selling a franchise business involves many of the same factors as buying or selling any other type of business, plus many more considerations.  A franchise is essentially a set of products and services, the procedures to produce those products and services, and a recognizable brand name to market the business.  When you buy a franchise, you are buying a business system that has been proven effective and the training to learn how to run that business.  Your task is to find the franchise that offers the best combination of those factors at a price you can afford.

Start up

• What types of business are you interested in managing?
• How much can you afford to invest?
• What is the total investment cost for one franchise unit?  What other start up costs will be incurred?
• What skills and strengths do you bring to the business?  Will you be managing the franchise yourself or hiring a manager?
• How much training will be provided as part of the franchise agreement, over what period of time? What kinds of marketing advice or programs are provided, including location selection?

Operations

• What are the ongoing royalties, and are they contingent on performance of the franchisor or the franchise unit?
• What are the income projections, and does the franchisor provide written substantiation?
• What contractual obligations will you have, such as goods and supplies, ongoing marketing, periodic renovations, or even supporting the franchisor?
• What topics are included in the operations manual?
• What kind of ongoing support is offered?  Does the franchisor have the resources to support your unit and a sudden growth in total franchise units?

Restrictions

• What kinds of restrictions and requirements will be in place, such as menu of goods and services, franchise unit appearance, hours of operation, bookkeeping, etc.?
• What is the potential for additional franchise units to be opened next door?
• Will you have a defined territory, with restrictions and protections?

Renewal

• What conditions can cause the agreement to terminate?
• Is the franchise agreement renewable?
• What happens if the franchisor goes out of business?

Buying a franchise does not guarantee you will succeed in business.  Like any other business, you can manage it well or manage it poorly.  The SCWBC excels at helping small business owners improve their businesses – our mission is to help you become more successful with each passing year.  If you are thinking about buying or selling a franchise, request a consultation with a business coach to get started.

Resources

• The Better Business Bureau in the city and state where the franchise headquarters is located
• State regulations of franchises (including your rights as an owner)
• Federal Trade Commission (www.ftc.gov).