Selecting the Right Franchise

There are many things to consider before you buy a franchise and start a business. You need to go over every detail of owning a franchise before you purchase one.

What Is A Franchise or Franchising?
A franchise is a legal and commercial relationship between the owner of a trademark, service mark, brand name and an individual or organization that wants to use that identification in business. The owner is called the franchisor and the individual or organization is the franchisee. Franchising is a process of marketing and distribution that a franchisor expands nationwide or worldwide a company or franchisee the right to run a duplicate of its business in another geographic area. A franchise business is a way a company distributes its products or services through retail outlets that are owned by third party operators. The franchisee must pay so they can market the services of the franchisor. Almost any kind of product has a franchise. The great thing about buying a business like a franchise is that someone else has already developed a thriving business model and marketing plan.

Find out everything you can about any franchise you’re interested in buying. The Internet is a good place to start your research. Write down everything you expect from the business. Always make sure the franchise fits your personal needs and is in accord with your long and short-term needs. Obtain information about the industry of the franchise. Look at how the franchise will perform in years to come and request information about its concepts and business practices. You should know what kinds of returns are expected in a certain industry before you choose a business. This will give you a better idea if a particular franchise has a good chance of succeeding. It’s an excellent idea to interview franchisees after you choose the franchises that are suitable and affordable for you. Ask questions about earnings, costs, support, marketing, consulting and training. Find out their opinion of the pros and cons of the franchise.

Choosing a Franchise That Fits Your Needs
Choosing a franchise to start your own business depends on several things. Think about the kind of skills and talents you have. What kind of things motivate you? Does the franchise match your lifestyle? Do you like to work around people or alone? Are you willing to commit a lot of time to a new business? Does the area where you live need a particular type of franchise industry such as pet care, health products or cleaning services? Your franchise should be a good fit with the community. Some people recommend looking at franchises that have recognizable names. It’s important to choose a franchise that you’ll enjoy or are passionate about. Make sure you’re qualified to operate the franchise that you choose. Will you be able to use the skills that come natural to you? You don’t want to go to work everyday and feel uncomfortable. You’ll probably want to open a business that makes you feel rewarded. There is over 100 different franchise categories such as pet, photography, healthcare, food, and fitness, travel, educational and clothing. Others are coffee, cleaning, bridal, senior care services and sports/recreation. It’s worth it to find the one that is a good match for you.

Costs of Franchising
Before you choose any type of franchise, you should go over every detail of your finances. You’ll have to pay a franchisor initial franchisee fees when you’re a new franchisee. There are also costs for the right to set up the business under their brand name in a certain area. You many also have to pay ongoing costs such as management service fees and admistration fees. This can be a fixed periodic amount each month or a percentage of gross revenue. There’s also the cost of paying the costs of a mark up on goods that the franchisor supplies. The franchisor is required to show you all the fees and costs of a franchise in the Uniform Franchise Offering Circular. Compare all costs with other similar franchises to make sure there are all around the same price. Going over all cost will be beneficial to you because it will help ensure that you have enough money to invest before you buy a franchise. It will save you a lot of stress and prevent you from getting yourself into debt.

Some of the different types of advertising programs that franchise systems employ are national/general, local and cooperative/regional. Brand and large scale advertising campaigns usually use national advertising. Local advertising exclusively advertises the unit. Cooperative/regional programs mostly promote within a geographically selected market area. One general advertising program may be used by a small franchise system. The fee percentages of advertising replicate the amount of the contract that is assessed. Certain advertising fees are stipulated in franchise agreements. There are franchise companies that will charge lower fees than those predetermined.

Choosing a Reputable Franchise
When you’re investing in a new business or a business for the first time then you’ll want to make sure you choose a business that’s reputable. Having a lawyer or accountant review the franchise contract and the company’s disclosure statement is one way to ensure a franchisee company is reputable. A lawyer that specializes in franchise law and a good accountant can give you important details before you sign an agreement. A franchise company that’s reputable usually knows about the area where it put your franchise. Most franchisees aren’t experienced finding good locations, purchase agreements or other processes. A franchise should be able to assist you with these things. Another thing to look for is the litigation history. Many well established franchises companies usually have litigation history but it’s important to investigate to find out how they handle conflict. Don’t buy a franchise that has a history of excessive litigation.

Always check the trustworthiness of a business before you buy a franchise especially if it’s new. The Better Business Bureau can give you important information you need about the franchise. Find out the history or tract record, property obligations, territory rights and profit loss projection. One of the best ways to find out information is to talk to the existing franchisees. If you spend time with them then you be able to see how their system works for yourself. You’ll be able to tell if they’re telling the truth about things such as training, support, marketing and earning potential. If a franchisor isn’t willing to give you admittance to the existing franchisees then he might not be honest. Sometimes there are good reasons for this.

Specialty Franchise Companies
There are many specialty franchise companies to choose from. Some franchise categories are HouseDoctors, Speaking Roses International, Pull-Out Shelf Company, The Tan Company and Perma-glaze. Specialty Retail Franchises include Merle Norman Cosmetics, Nevada Bob’s Golf, Discount Party Stores, Global Pet Foods, Living Lighting and Pet Care Specialist Grooming Saloons. Learning Express is the nations leading franchisor of specialty toy stores. It’s the largest and most successful specialty toy retailer in the United States. Another great specialty franchise company is Elements Therapeutic Massage. This company has 12 years of franchising experience and over 25 years of business experience. You don’t need any previous industry experience to join Elements. They provide all the training and tools that you need. Some other popular franchises are Carvel Ice Cream, Molly Maid, Tutoring Club, Mr. Handyman and Maui Wowi.

Types of Franchises
There are 5 different types of franchises available. The single unit franchise means the franchisee purchases the right to operate only one franchise. This is a common type of franchise investment. Most franchisors want single unit operators to be owner operators. Co-Branded Franchises means a franchise company offers more than one franchise brand. This type of franchise is usually seen in food franchises. Multi-unit franchised means the franchisee purchases more then one unit. The business costs can be drawn out across multiple units. The Area Developer Franchisee contracts for a certain geographic region and a precise amount of units to be opened on a set development schedule. An Area Development Franchise means the rights to develop a specific geographic territory are granted by a franchisor to a business entity for fast expansion of the franchise network. This type of franchise has and exclusive and protected area and no other franchisees are allowed to open a franchise. Area Director/Master Franchises has the rights to a larger area then an area developer.

Markets for Your Franchise
It’s very important to know if your business is right for your market. You’ll need plenty of customers in your market in order for your business to succeed. Your franchiser should give you demographic information. Competition may be minimized between franchisees if you’re in a protected territory and will ensure growth protection for the franchiser. Find out if there are other franchise outlets near your franchise. There usually isn’t as much competition if you’re offering a different kind of product then other franchises. Location is still important even if your product is unique. Take notice of how many people and cars there are in the location where your franchise would be. Your storefront should be noticeable from the street. There should also be easy access to your store and plenty of parking. Another thing that’s important is to make sure your prospective customers can afford to buy your products or services. You won’t profit if no one in the area can afford to buy from you. You can also review your franchise market by researching publications or websites. Look for the size of the market and the growth potential for the future.

Franchise Training and Assistance Programs
A franchise company should offer training and assistance programs and be committed to them. Usually training programs are between one and five weeks. Find out everything you can about the kind of training they provide. Ask the franchisor a lot of questions. You’ll want to know how much classroom training you’ll receive and how much time you’ll be at the operation location. Inquire about the subjects that will be covered and if they’ll be covered thoroughly. A worthy training program will cover setting up the business, marketing, employee management, make deposits and all business procedures. Some franchisors may hold conferences that can be another source of training or education for the franchisees. This is a great way to network with other franchisees. Information in the training manuel should be updated on a regular basis. Ask a current franchisee about all training resources that were offered to them by the franchisor. Ask them if they received enough training to make them feel prepared and comfortable when they opened their business. The length of the training isn’t as important as the quality. Never sign a contract unless you receive excellent training from the franchisor. Support personnel can help you when you first open your business. This kind of support can help you get started and make sure your doing things right.

Paperwork and Documents
It’s mandatory that a franchise gives you a detailed disclosure document about 10 business days before you commit yourself legally to the purchase or pay any money toward it. You should take your time and study the document very carefully. Some things on a disclosure document should include a names, addresses and telephone numbers of previous purchasers who live closest to you. Other things involve a fully audited financial statement of the seller and the cost of starting and keeping up with the business. There should be a list of responsibilities that you and the seller have to each other. A franchise agreement is one of the main documents. This document is legally binding to both parties. It clearly shows all the rights and obligations of the franchiser and franchisee. You should have it reviewed by a lawyer before you sign it. It’s best that the lawyer be familiar with franchise matters. If you want to negotiate an agreement, you should find out whether it’s negotiable a head of time. Franchise agreements that are negotiable are usually based on your skills so you’ll need to consult a franchise lawyer.


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