Owning a Franchise – Advantages and Disadvantages – How Much Will it Cost?
How does owning a franchise work? Are you an entrepreneur thinking of owning a franchise of your own? Is franchising right for you? Just like any other business, owning a franchise is also a risky venture having its own benefits and downsides. The decision of owning a franchise takes long-term commitment.
It is not advisable to start the planning of owning a franchise system by forming a committee with friends or family members who don’t even own a business. In fact, it may very well lead to failure.
Is owning a franchise worth it? Do you know that 4 out of every 5 American franchise opportunities fail in the first few years of franchising? Some of the reasons include
• Over regulation.
• Litigiousness of the industry.
• Lack of capital.
LIST OF SOME POPULAR FRANCHISES TO BUY
- Dollar Tree franchise
- Dollar General franchise
- Wawa franchise
- Family Dollar franchise
- QuikTrip franchise
- Trader Joe’s franchise
- Zara franchise
- Dollarama franchise
- Sephora franchise
- Dave and Busters franchise
- Waffle House franchise
- Big Lots franchise
- White Castle franchise
- La Fitness franchise
- Pollo Tropical franchise
- Chipotle franchise
- Starbucks franchise
- Chick Fil A franchise
Advantages and Disadvantages of Owning a Franchise
What are the advantages and disadvantages of owning a franchise? Owning a franchise is quite an enormous task and it requires considerable amounts of finances, time and also proper planning. Once it starts to operate, you’ll recognize that this business can be very profitable if done whole wholeheartedly.
In this post, I will be sharing some possible steps of owning a franchise, the pros and cons in owning a franchise so you can weigh it and see if you should continue with your drive for the project.
STEPS TO OWNING A FRANCHISE STORE
- Understand what a Franchise Is and How it Works
How much money can you make owning a franchise? Before you begin, you need to understand the meaning of the word franchise. Franchises are business systems in which the franchisor (company) permits the franchisee (independent operator) to distribute and sell its services and products with its trademark.
To purchase the franchise, franchisees have to establish a contractual agreement with the franchisors. This agreement contains terms and conditions which have to be signed by the franchisee. These are largely binding.
- Requirements to set up a Franchise
First of all, you will be required by the Federal Trade Commission to prepare a standard disclosure document for your franchise. This document is called Uniform Franchise Offering Circular (UFOC) required by all companies. In addition to this, there are many states that have their own requirements.
Make sure that you look into the laws pertaining to the state you plan to franchise in.
Second, you will be required to prepare an audited financial statement for the franchise company.
This is actually one of the requirements under the legal section we mentioned above. You won’t be able to complete any of the legal requirements until you have first completed the financial statement.
You will need an experienced accountant that is familiar with franchise accounting. This person will advise you on the financial structure of your enterprise.
- Learn from People that have Started out Before You
It may seem like a simple observation, but there are many people that are running their own successful franchises. There are also people that have failed – and you should speak to them all.
Why? Because they will have valuable insights into what worked and what did not, and this will simplify your franchise journey.
- Prepare a Detailed Business Plan
It is best for you write a detailed researched business plan for your franchise business for at least 2 to 4 years. This will be a benefit for you in the future as it can be a guideline throughout the life of your franchise business. It will prove to be a good path to assist you in overcoming future obstacles.
If you are still a newbie in business world, you can take some classes to gain knowledge in the business field you are interested in. Many colleges offer short term classes that cover these courses within 6 months. Alternatively, business consultants can also help you with valuable advice.
- Establish a Franchise Agreement and Fee
As you are considering owning a franchise, you have to prepare a franchise agreement. This document will permit the franchisee to run the business according to the specified legal obligation and intellectual property rights.
The agreement must meet local law requirements, and it should protect the franchiser and present a workable document to the franchisee.
One benefits of owning a franchise is the fees you get from your franchisees. It is the first thing you need to consider to keep the business running. A franchisee will be required to pay an initial fee to the franchiser for the privilege of joining the franchise network.
Franchisees may also pay management fees, although they are sometimes included in the wholesale price of the product. Lastly, the franchisee pays an ongoing royalty fees that represent a specified percentage of it profits.
How to Invest Money into Franchise
How do you choose a franchise that is right for you? Let the truth be told, irrespective of the business scale; small or large, even franchising, it takes money to kick start and run.
Investing in franchise business needs cash flow and reserve capital to maintain, keep and enhance the movement of the business non-stop. Do you have capital and don’t know what to invest on? Why don’t you consider to investing such money in a franchise business – Just an advice hope it yield out well in finding the right franchise for you.
Do you need the brilliant ways it encompasses to invest in a franchise?
Are you a lover of franchise business but doubting whether to invest on it or not? No matter the approaches you may view this, buying a franchise is a golden opportunity to make way in business real quick.
How? Fine.. because you are taking up a business that have already made name and gain ground almost everywhere.
As a franchise investor, you are liable to meet different managers, have their backing, support and learn more about business know-how from them, and indirectly your business orientation will be booming.
Selecting a franchise worksheet answers
The following are the steps to starting a franchise business and way to ply if you are really interested in investing in a franchise opportunity.
How To Find The Right Franchise For You
1. Deal with Franchise Business of your Qualification
The knowledge, skills and qualifications you have in your possession should come first before investing your capital in a franchise opportunity. Check on the company you want to franchise with if they are into the business you are knowledgeable about, and at the same time if their business opportunities really meet your desires and need.
It is very wrong for an individual who worked and gained experience at a reputable restaurant to invest in a dry cleaning and laundry services franchise opportunity – the two have nothing in common, but it is ideal and logical if someone with a fast food experience franchise with Subway, Wawa and other fast food business company who have a franchise program.
Investing in a franchise business you have the skill is a true and sure ticket to your liberation, breakthrough and success.
2. List out those Franchising Company that interest you
Verily! There are many franchising company out there and for the fact that you will have up to three or four of them that interest you, it is advisable you take out your jotting note and embark on a slight research.
Carry out a research on each of the franchising company that stand out to be your favorites, research on their franchising fee, the startup costs for each of them, their requirements, terms and conditions etc.
The startup cost of the franchising companies differ from one another, it is however, left over to you to determine which of them meet your demand and which among them will you be able to afford.
There are some franchise that require you to have $10,000+ and we have host of them that require hundreds of thousands dollar. Be wise and watch your pocket before you choose.
3. Consider the Failure Rate
One of the fears any start up business owner do have in mind is the fear of failure. The fear to invest some huge amount of money into a business and at the end of the day, join the team of unsuccessful business.
Research again and check for the rate of failure on each and every franchising company under consideration. It is evident that the rate of their failure record varies just like the startup costs, all these reasons need to be taken cognizance of before investing on any franchise company.
Some franchise businesses fail because of their lack of confidence, some suffer for overconfidence and some are inexperience.
4. Check out for Competition
Before deciding on which franchise business to go for, it is expected of you as an investor to check and access your environment for the number of similar business you are thinking and aiming to franchise.
For instance, if you are planning to take up Wawa Restaurant you need to consider any business related to restaurant in your environment irrespective of the brand.
5. Highlight your Budget for the New Franchise Business
Looking at franchise as a concept, it has an economic importance which is advantageous to the investors and that is, the franchise fees cover half of the startup costs.
How much does it cost to invest in a franchise
The franchise fees cover a larger part of the startup costs though that doesn’t guarantee you that there wouldn’t be some financial crisis along the way if care isn’t taken, most especially during the trying, dry and long time – before you gather your own potential customers to patronize you.
6. Review Carefully all the Franchise Paperwork
It is very imperative you read and review all the documents involved in the course of signing up the franchise agreement before you sign any. Hire an attorney to read and explain anywhere you find complicated or involve legal term.
Legal representation of business like franchise is absolutely necessary and a fine and sound attorney will be of great help to you especially in spotting some difficult language or aspect you might have unintentional skipped.
And finally invest! That is if you follow the given instructions on how to invest in the right franchise business.
The Pros of Owning a Franchise
• Brand Recognition: One advantage of owning a franchise is that you easily get a brand recognition of your business. Since it is a franchise business, it means there will be many outlet carrying that brand name which may lead to many people seeing it and recognizing it by giving your products or services a try.
• You’re the Boss: With a simplified system of running the business in place, you don’t need to stress yourself. Your main job is to manage the business and profit from it. This one of the benefits of owning a franchise.
Cons of Owning a Franchise
• It’s Expensive to Start: It is more expensive to own a franchise than building a normal business. This is because of the process involve and the technicality of everything.
That being said, it is now up to you to take that final step. Make that decision after careful thought and considering all the aspects. Once you have made that decision, go for it. Best of luck!