November 16, 2012
Starting a franchise can seem appealing to individuals who want to run their own business and be their own boss.
Franchises can be very successful but there are many factors that affect the success of a franchise that individuals should consider before buying one.
It is important to understand how a franchise works and the challenges many face when trying to start a franchise. Below are five considerations and tips for individuals contemplating starting or buying a franchise.
Is the franchise right for you? Before opening a franchise, it is important to understand how franchises work. Most people who own franchises are required to follow the guidelines set forth by the franchisor. Franchise experts say that running a franchise is about creating a great experience for the customer and building the company brand.
Search for opportunities. It is important for individuals to learn about the franchises in their area and figure out what type of franchise interests them. After finding an industry, search the market and determine if there is a demand for the product or service in the area.
Review documentation. Businesses available for franchise are required to have a Uniform Franchise Offering Circular report, which lists the franchisor's history, terms of agreement, and sometimes their financial statements. It is important for individuals to carefully review this document before agreeing to run a franchise.
Determine costs. Franchise fees can vary so it is important to learn about all the franchise's fees. Don't forget to consider royalty fees and if there is an upfront franchise fee. These costs can all help an individual determine if starting the franchise will be profitable.
Consult an attorney. This is a very crucial step. A business law attorney can look over the franchise's document and determine if the franchise will be a good deal. An attorney can help answer questions about franchise law and the different aspects of running a franchise from a legal and different business perspective.
Source: Bloomberg Businessweek, "Before you ink that contract," Amey Stone