subject: To Buy Or Not To Buy A Franchise [print this page] To Buy Or Not To Buy A Franchise
Often times an aspiring franchisee finds themselves having the funding, not wanting to work for somebody else but having little or no business experience.
So, what is a franchise?
Well, essentially a franchise is a business model that allows a person to purchase the right to utilize the name, logo and a proven system for a designated up front price and usually a percentage of the profits which are paid to the franchisor.
Just like with starting a business any other way there are positives and negatives that should be considered
One of the most advantageous reasons for purchasing a franchise is that it enables someone to hit the ground running and it removes a lot of the work of coming up with a concept and turning it into a running and profitable business.
Some the most obvious negative aspects to buying a franchise are the franchise fees, and the amount of reserves that a franchisor usually requires be set aside as part of your start-up funding. The financial requirements mean that franchise ownership is out of reach for most perspective business owners.
However, purchasing a franchise lowers the risks by dramatically increasing the odds of success that one cannot get with a brand new and unknown business, regardless of how good the service or product is. There is no real way to know how well a new, unknown business will do. With a franchise you have an opportunity to see the record of the parent company and to speak to active franchisees in order to get an idea of the viability of the franchise you are considering.
So what are some of the determining factors should you consider when looking at purchasing a franchise?
It is important to keep an open and objective mind and not to get your heart set on a particular franchise. Whenever possible, take a look at several franchisors in the same industry to see which one(s) are going to be the best fit for you. Be sure to look at the how long the company has been in business, the number of units sold and the number of units opened and closed within the past calendar year. All of this information, and more, is available in the Franchise Disclosure Document, also called the FDD.
Also make sure that the business you are looking at is something that you would enjoy doing. Your odds of success go up if you are working in a business you enjoy versus essentially buying yourself a job. Buying a franchise is a big commitment and should not be taken lightly. Be sure to take your time and do your research.
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