5 Things You Need to Know Before Becoming a Franchise Owner
- Written by Scarlet Gratton
Starting a business is always a great opportunity to establish a profitable career. Even though starting and running a business is difficult, the benefits you get to reap once your company becomes successful are well worth the effort. However, while there are resources out there to help business owners with important things like market research, some entrepreneurs simply lack the experience or enough funds required to start and develop a business venture.
These factors may discourage them from even trying. Still, if you wish to own a business, you can do so even without the experience. The answer is buying a franchise business. Franchises are better suited for new entrepreneurs who haven't had any previous dealings in the business world. Your inexperience or lack of know-how won't hinder you in any way if you opt for a franchise.
As a matter of fact, you will learn a lot about business through your franchise. Still, like any other business, a franchise has its own unique advantages and disadvantages. You must familiarize yourself with what's involved in a franchise business before you decide how to proceed. Having a successful business means that it is easier to sell my business when I want to. That being said, here are a few things you need to know before becoming a franchise owner.
What's a franchise?
A franchise slightly differs from regular business models. In fact, it's an already developed business model that's supported by a certain brand or a trademark, i.e. a franchisor. Franchising is a method of expanding a business through a licensing relationship. In other words, brands expand to other locations, in order to distribute goods and services by granting a license or permission to a third party that will work under a brand's name.
For example, if you wish to open a restaurant, you can buy a franchise, such as McDonald's, Wendy's or Subway instead of developing a brand new business. What's interesting about franchising businesses is that even though you're a business owner, you're not alone. In other words, a franchisor will provide aid and support to help you run and grow your franchise. This is quite comforting, especially for entrepreneurs who have never had any experience in running a business.
How much does it cost?
As mentioned before, you can buy yourself into a franchising business. That means that you only need capital required to buy a franchise and there are no additional costs, like the costs of growing your own business until it becomes profitable. Depending on the franchisor, the franchise cost may vary.
Simply put, different brands have different prices. For instance, buying a McDonald's franchise can cost from $955.000 to $2.2 million based on the location and other factors. In other words, you will need an initial capital, as well as some degree of liquid assets. However, franchisors do in fact provide franchising business with financial support, among other things. Are you looking forward to gaining much more valuable information regarding how much money you need for a franchise and where it comes from? Make sure you check the froyo franchises to dig deeper into it.
How long does it take?
The main question franchise owners will most likely have is how long it will take to start a franchise. The answer depends on the type of business you've chosen and the franchisor. From negotiating with a franchisor to finding the right location and finally opening your store, it may take around a year more or less. That is if you have everything planned out beforehand and you don't run into any significant delays. The factor that takes most of your time is finding the right location.
Location plays a vital part in your franchise business success and you cannot afford to make a mistake here. For example, if your franchise is supposed to rely on high traffic, you must consider a highly urban area that can provide such traffic. The fact of the matter is that you must find a location that will suit your franchise needs, such as enough space for a building, parking lot, storage space and so on.
What does a franchisor do?
When talking about franchisors, it's important to understand their role in the whole franchising business. In most cases, a franchisor will provide franchise owners with extensive training on running a business, as well as provide staff training for managing a store.
What's more, they will provide developed marketing strategies and campaigns you can use to promote your franchise. Again, the amount of support provided depends on the franchisor. It's not uncommon for franchisors to provide financial support also called franchisor financing as well. After all, it's also in their best interest for you to succeed as their brand's representative.
Don't skip due diligence
When buying a franchise, there's more to it than simply buying the right to operate under a trademark. Franchising purchase is conducted under legally binding terms usually defined in a contract. As soon as you let a franchisor know you're interested in buying their franchise, they must provide you with appropriate documentation. In fact, a franchisor must provide you with the Franchise Disclosure Document (FDD). This document describes the terms, conditions, fees and any other factor involved in buying, owning and operating a franchise business.
Many entrepreneurs make a mistake and fail to read and comprehend the entire document. It's important to understand that owning a franchise business is far less flexible than having a business of your own. In most cases, franchisors make most of the decisions and you're left with fewer choices. Also, some franchisors implement additional fees or rules that are not common for the franchise business model. If you don't like the terms, you should avoid buying that particular franchise. It's better to understand what's involved before you make the decision than having to discover midway that things aren't as you thought they'll be.
Buying a franchise can be an excellent opportunity to learn the ropes of running a business, as well as establish a profitable career. Entrepreneurs who lack the experience or even lack the capital required to start their own business should consider franchising as an alternative.
Scarlet is a passionate writer and a regular contributor at highstylife.com interested in fashion, lifestyle, and health. She loves traveling, you could say that she is a real travel addict, especially when she has a chance to visit some exotic destinations. She would tell you that inspiration can be found in the most unexpected places.
