Are You Ready For Franchising?

Follow These Steps Before You Buy.
From the desk of Bob Macek

Franchising. Just saying the word has an almost soothing quality to it as it rolls off the tongue.As a concept, franchising is suppose to provide business owners a sense of comfort and ease, knowing that behind your new venture are people with years of tried-and-true business experience waiting to share it with you.

Franchising is a business network that allows people to share a brand identification, a successful method of doing business, and a proven marketing and distribution system.

A franchise is supposed to do one thing and one thing only and that is to reduce your risk of failure.

But franchising isn't for everyone. In fact business owner "wannabees" should think carefully before spending many months and much cash on securing a franchise that either isn't right for them or really provides no extra benefits.

The No. 1 question a person should ask themselves before going the franchise route is what will they get for their money?

Depending on the size of the franchise fee and royalties, which vary greatly among franchises, a potential franchisee should be concerned about a wide range of things including: the area covered by the franchise agreement, amount of training and materials provided for managers and employees, help with advertising, equipment packages and financing options. Of all of those, financing options, can speak volumes about the company.

One should always be skeptical of franchisors who won't finance at least part of the business. It doesn't show much faith in the business or the potential franchisee. But the franchisor also wants a potential franchisee to show faith in the business and persistence in their dream of owning a business. That's part of the reason behind making an anxious entrepreneur jump through a hundred hoops, sometimes before a company will even consider a potential franchisee.

Keep the following steps in mind when you consider becoming a franchisee:

SELF-EVALUATION. Ask yourself whether you are willing to make the sacrifices of long hours, hard work and financial uncertainty needed to make a franchise work? Do you enjoy working with people? Are you a good supervisor? Or are you simply attracted by the idea of making easy money. Good franchisors will make sure you answer these questions about yourself.

INVESTIGATE THE FRANCHISE. Do what most people do when making a major purchase such as a home or car: compare. Talk to one franchisor then talk to a similar franchisor. Talk with the franchisees from the company or similar category. The Federal Trade Commission will be helpful in obtaining information on where and how to start. Their Franchise Opportunities Handbook, from which some of this information was taken, is a good place to start

KNOW THE MARKET. Drive the streets and talk to the people where you plan to locate your franchise. Look and listen for what products and services are needed and check out the competition. How the area is growing and what may be needed in the future?

READ CAREFULLY AND STUDY DISCLOSURE STATEMENTS. The franchisor is required by law to provide to the prospective franchisee an offering circular or prospectus. If they do not, then ask for one. These statements contain information ranging from a description of the business to lawsuits, previous bankruptcies, financing assistance, restriction on the goods or services franchisees can sell and training programs. After studying the statement, contact a few of the franchisees that will be listed.

OBTAIN PROFESSIONAL ADVICE. While your banker will have some helpful advice about putting together a solid business plan and other financial options, reputable legal counsel and accountants will help you evaluate your risk and opportunities.


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About the Author:
Bob Macek is a business consultant specializing in small mid-size businesses. He has been a Professional Business Broker since 1982.
If you have questions regarding the purchase or sale of small, mid-size companies contact Bob at: bob@probizusa.com