A business franchise-what a perfect way to go into business for yourself. You get to own your own company without having to develop the market, advertise, build brand recognition, develop products, or even set up an accounting system. Instant entrepreneurship. For all those reasons, buying a business franchise can be a rewarding way to set out on your own.
The franchiser specifies the décor, provides the products, writes the commercials and trains new owners. It creates and publicizes special promotions. The franchisee gets a complete bookkeeping system, ready to go. Some franchisers offer medical benefits to their franchisees' employees and give the franchises access to legal services (not involving the franchisers, of course).
Franchisers tell you that owning a franchise can give you the benefits of business ownership without the risks. Or you can look at it as all the inconvenience of a small business-having to keep long hours, buying your own copiers and missing out on discount movie tickets-while having limited decision-making powers. Can you imagine a McDonald's franchisee serving Big Macs on onion rolls instead of sesame seed buns?
The system obviously works, because franchises are everywhere. We immediately think of restaurants, realtors, video stores, convenience stores and maid services. But there are also executive recruiters, accounting firms, ad agencies, legal research services, financial consultancies, interior designers, tutoring services and firms that coach small business owners. Plus multitudinous other business categories listed at such sites as www.franchise.com.
But the fact that you're affiliating with a known quantity doesn't mean that you'll have less work to do. In fact, your research on the franchiser should be even more thorough than your research on the market. Remember, franchisers want to sell you their product. So before you sign up to open a Soup -n' Fish restaurant, you have to research the restaurant business in your area as you would if you were entering it on your own.
Study the market to verify that the franchiser's claims about its potential are true. Then investigate the company itself very thoroughly. Talk with customers, suppliers, and above all, present franchisees. You can get their names from the "uniform franchise offering circular" that franchisers have to file in each state. If Soup -n' Fish hasn't filed in your state, run in the other direction.
Read financial analysts' reports on the company, preferably free through your broker but even if you have to pay to access them through Yahoo. Analysts find out a lot.
Once you've picked a franchise and applied for it, you'll probably get a boilerplate contract. You may be told that everyone signs the same contract, and that you shouldn't worry about the parts you don't like because they're never enforced anyway. Not true. Review the contract carefully with your lawyer, and negotiate the changes you want. Some of these may be:
As one franchisee representative says, the franchiser will tell you it's like buying your own home but actually it's like renting an apartment. You're offered a contract for a limited time. Ten years usually works. Five years usually doesn't.
Some franchisers are more conscientious than others about protecting their franchisees' territories. Get a promise that you won't suddenly find another Soup -n' Fish on the next block.
Those special promotions? You may be asked to charge fifty cents for soup during the month of October, but the franchiser may conveniently forget to compensate you for your lost profit. Make sure that won't happen.
What if Soup -n' Fish sells out? Will the new owner keep you? See that he or she does, and that they pay you for all the new uniforms and signs you'll need.
If you're in a venture that requires decision making, like lending or executive recruiting, you don't want your franchiser second-guessing your business decisions. On the other hand, you don't want to be held liable for the franchiser's business mistakes.
Being on the ground, you'll probably know more about customer desires than Soup -n' Fish corporate. Don't let the parent force you to take products you don't want, like rhubarb soup. Or forbid you to carry products from others, like the best chicken soup in the world, which happens to be made by your aunt. Make sure, too, that the franchiser will listen to your opinions and ideas.
If Soup -n' Fish has company-owned restaurants, make sure you get the same prices they do.
Article provided by Homesteader
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