subject: Buying A Franchise [print this page] Franchising refers to using some one elses successful business model. In simple terms, it refers to creating chain stores by giving rights to use the name, logo, model, advertisement tools and trademark too franchisees. People usually franchise there business in order to minimize investment and liabilities of the business.
Buying a franchise business is generally preferred over a privately owned one because of the brand value, huge customer base, guaranteed returns, support from the franchisor and easy sale if one wants to.
An ideal franchise for sale is the one that asks for/provides the following:
1.Reasonable capital requirement
2.Successful business model
3.High revenues
4.Flexibility
5.Uniqueness
6.Good market potential
7.Minimum competition
8.Right to take independent decisions
9.Efficient support system
10.Training
If you plan to buy a franchise make sure you consider all the above points and also check the financial details of the business for the last five years. Ask the seller to produce balance sheet and profit and loss statement of the period mentioned. Make sure your accountant is satisfied with the figures.
If the investment is huge, it is advisable to take help of a professional or business broker to guide you through the process. Business brokers have a good experience and information about the market trends and society. They can save you from getting con. They would help you in obtaining details of the business through disclosure agreement and also about the environmental attributes.
Ensure that the franchise you are planning to buy complies with government norms and policies. Also make sure they use latest technology and have a potential for growth.
Understand the business environment and also the requirements and amount of hard work you need to put in. Know the operating cost and risk management techniques.
Negotiate price with the seller. Take help of your business broker in settling at the best price that is calculated with a practical and skeptical approach. Apply the right method of valuation while analyzing the cost of the business.
Legal environment of a business is the most important one to understand.There are certain laws that regulate franchising in a country. Like if you buy a franchise in Australia, you have to work according to The Trade Practices Act, 1974 which concludes the Franchising Code of Conduct.
It states that the franchisor is required to present a disclosure document 14 days prior to the date when franchise agreement is entered into. It defines the requirement in content of the agreement.
So, similarly, there are acts and provisions that regulate franchising in other countries. There might even be some state regulations affecting the business opportunity, positively or negatively.
Like people usually say; excessive control or interference in regulation of franchising sector may result in loss of interest of potential businessmen in franchising.
People, I suggest you please go research well before taking a final decision. There are a lot of factors affecting the functioning of a franchise. Make sure you know it all before you make an investment.
by: pauldarreman
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