Thinking About Becoming a Franchisee?
Posted on October 22, 2010 by My Franchise Law
When thinking about buying into a franchise, many people may be under the impression that it’s an easy job with a no-fail format. However, this couldn’t be further from the truth. Franchise ownership can be a challenge, and there is no guarantee of success.
Brand name recognition = instant appeal: In truth, just because you have signed on with a recognizable brand name does not mean that you will soon be overrun by customers. You will need to look into your competitor’s business and whether or not the area is already saturated with the brand you are offering. You also need to find out if you are set up in an area where there is an established customer base for the franchise business — a fitness center may not thrive within a geriatric community, just as a sports bar may not flourish in a family-oriented suburb.
The more franchise units you see, the more successful the chain: In reality, just because there are many franchise locations within a market doesn’t mean business is booming. Without seeing the financial statements, including how many franchisees have closed shop, or moved on, you cannot tell what is going on behind the scenes of a business franchise. It’s possible the franchisor is more concerned with starting people out than providing the best service to his established franchise units. They may be indiscriminate with whom they are working with, which could bring down the reputation of your business as others fail down the road. It’s important to do a careful investigation of each business’s audited financial statements to get a clear picture of their franchise success and failures.
The more you pay up front, the bigger the return on your investment: Just because you pay a hefty franchise fee up front doesn’t mean you’ll see immediate profits. You will still need to put in the time and effort to grow and develop your franchise business and make it run at its peak performance, and you may actually find yourself handicapped by the cost associated with getting started, leaving you with less money to work with as you try to find your feet during the initial stages of owning a franchise.
The bottom line: When considering buying a franchise business, you need to do your research. There are many places to turn for help, but a great place to start is with a knowledgeable franchise lawyer. They can assist you with market research, locating funding and negotiating contracts. A good franchise lawyer can also help you put together business plans and assemble a team of advisors to help ease the stress of the buying process.