So You Want To Buy A Franchise? …Research!
However, my father-in-law’s (may he rest in peace) thought process was more like a 25-step process with illustrations, narratives and budgets. The idea being that you research your project and then you use the tools available to you to plan out the process to avoid surprises. This detailed research method should also be used in evaluating if entering the business world as a franchisee is right for you.
A franchisor grants a franchisee the rights to market the franchisor’s goods or services within a certain geographic area. The most popular examples are McDonald’s and Wendy’s. Of course, franchising markets extend out much further than just fast food franchises. In fact, recently some of the hottest franchises involve hotels, fitness and hair styling. And, therefore, that is your first research project! Which of the thousands of franchise opportunities are right for you? Some items you need to consider in this evaluation are:
- Capital availability – How much money do you have or have access to and can you afford to lose it?
- Current income – Do you have a need for a specific income now? Customers don’t just walk in the door when you decide to buy a franchise. There is start up and down time while the business is forming and growing.
- What are you good at? – Do you have any special skills or experience that will give you an advantage in operating the business franchise? Or are you more of a hands off owner that will hire a manager to run the day to day operations?
- Is time on your side? – How long of a term are you interested in? I know until you make a million dollars – but that doesn’t happen for everybody. Once you commit to a franchisor you will need to stick with it until the term ends
- Franchisor relationship – Although you are the owner of the business, let’s remember that you are a franchisee with a contract to operate and act the way the franchisor has specified. So the franchisor calls most of the shots! Can you work under the control of the franchisor?
One needs to research all of these areas and one should also consider discussing these opportunities with an attorney and accountant. I remember someone once telling me that you don’t get something for nothing! Be wary of free consultations with business people directly associated with a particular franchise or group of franchises – they may have a vested interest that is not yours! You will need to spend significant time with the franchisor evaluating their products and systems. And, we all know that a satisfied customer is the best source of advertisement – so take some quality time and meet with other franchisees to find out their experiences. Discuss their initial evaluation process, current financial status and the franchisor along with other pertinent knowledge. This will be invaluable in helping make a good (well-researched!) decision.
Although, my father-in-law once called me a “dead man” (this is entirely true), I have always admired him and it seems he had great advice on attacking projects that can used in all facets of life – research, research, research!
|Rick Coyne, CPA, Partner
(609) 520 1188
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.