how to decide on franchise

When you are looking for a franchise, it's important to do your research and make sure that the business suits your long-term interests.

• Franchisees should look for a supportive franchisor to purchase from.
• Owning a franchise is a long-term commitment, so pursue a business that will still interest you in the future.
• For each of your prospective companies, you should research the processes involved in franchising, ongoing support, and the terms of the franchising deal to help you make your decision.

Full Answer

What should I consider before buying a franchise?

Ten Things To Consider Before Buying A Franchise

• What's the story on the franchisor's business record and reputation?
• Have you spoken to existing franchisees?
• Have you contacted government consumer protection agencies, Canadian Franchise Association and your local Better Business Bureau?
• Is the franchisor's infrastructure comprehensive and stable?

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What to consider before buying a franchise?

What to Consider Before Buying a Franchise

• Make Sure Your Family is On Board. Owning a franchise—or a business of any kind—is truly a family affair. ...
• Count Your Cash. ...
• Reach Out to Other Franchisees. ...
• Do Some Soul Searching. ...
• Test the Product. ...
• Understand What You’re Getting Into. ...
• Talk to a Franchise Consultant. ...
• Come Up With an Exit Strategy. ...
• Consult With Franchise Experts. ...
• Do Your Due Diligence. ...

What are the steps of buying a franchise?

• Matches your financial resources
• Provides you with the lifestyle you imagined
• Uses your particular skills and experience
• Provides a recession-resistant product or service
• Has a majority of happy and successful franchisees
• Employs an experienced and enthusiastic staff of personnel who will help you achieve your dreams of business ownership success

What are the criteria for selecting a franchise?

What selection criteria are there in franchising?

• Personality Profile. The franchisee’s personal characteristics influence in many ways the atmosphere within his business and the contact of his employees to the customers.
• Professional Qualifications. The professional requirements depend for the most part on the business activities of the franchisor.
• Economic Situation. ...

How do you decide if a franchise is right for you?

Here are the five steps to take to determine if a franchise is a match:Create a foundation of trust. This may sound obvious, but trust is not always achieved in environments that are not transparent. ... Emphasize open communication. ... Set clear expectations. ... Passion is key. ... Find a good match.

What are the four main factors to consider when selecting a franchise?

So before you decide if it's right for you, here are 6 factors you should consider before buying a franchise.Demand. As is the case before starting any new business, find out if there is a demand for the product or service you intend to offer. ... Track Record. ... Investment. ... Competition. ... Training. ... Restrictions.

How do you choose a profitable franchise?

Franchise industry expert Joel Libava, 'The Franchise King', says profitable franchises have three things in common:They offer a superb product (or service).They have top-shelf marketing.They focus on making sure their franchisees are making money!

What are the 4 types of franchise arrangement?

Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.

What are the weaknesses of a franchise?

There are 5 main disadvantages to buying a franchise:1 - Costs and Fees. ... 2 – Lack of Independence. ... 3 – Guilt by Association. ... 4 – Limited Growth Potential. ... 5 – Restrictive franchise agreements.

What are 5 characteristics of a franchise?

7 Major Characteristics of a FranchiseSolid Concept. ... Effective Franchise Business Model. ... A Good Franchise Training Program. ... Established Brand Image. ... Franchises with Larger System Size. ... Clear Communication With Franchisees.

Can a franchise make you rich?

The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.

What are the 3 conditions of a franchise agreement?

The key elements of a franchise agreement generally include: Territory rights. Minimum performance standards. Franchisors services requirements.

Which industry is best for franchise?

Other commonly franchised industries include:Automotive repairs and services.Environmental services.Hair salons.Health aids and services.Computer and phone repair.Clothing stores.Children's services.

What is franchise strategy?

Put simply, a franchise strategy is a road map that gives your business direction by: outlining objectives. helping you to understand the landscape in which you operate. mapping tactics to achieve your goals. planning for any potential obstacles in the road.

How do you structure a franchise?

The following are the steps to franchise your business:Determine if franchising is right for your business.Issue your franchise disclosure document.Prepare your operations manual.Register your trademarks.Establish your franchise company.Register and file your FDD.Create your franchise sales strategy and budget.

What are the 7 salient features of franchising?

The seven key characteristics are:Alignment. Alignment of the values and ethics of a business is essential both with the internal behaviour of the employees and externally with business partners. ... Commitment. ... Mutual interest. ... Communication. ... Accountability and responsibility. ... Professional conduct. ... Pre-agreed dispute resolution.

What are the 4 types of franchising and give an explanation about it?

Learn the 4 main types of franchise arrangements: single unit, multi unit, area developer and master franchise. The franchising industry is very versatile, with multiple franchises, industry options and investment ranges. In addition, there is a diversity of types of franchise arrangements available.

What are the factors you should consider before developing a franchise?

Ten Things To Consider Before Buying A FranchiseIs there strong consumer demand for it? ... Are there many competitors? ... Is the product or service of outstanding quality?How does its quality compare to the competition?Are you confident you can market the franchisor's product successfully in your marketplace?

What are the factors of franchising?

IBISWorld's research identified 240 key success factors for franchises but highlighted six as the most important:Having a loyal customer base. ... Having a clear market position. ... Business expertise of operators. ... Ability to control stock on hand. ... Establishment of brand names. ... Workforce.

What are 4 advantages of a franchise?

Advantages of FranchisingLittle to no industry experience is necessary. ... Existing customer base and brand awareness. ... Lower risk than starting an entirely new business. ... Support from the franchise owner. ... Ample opportunities for expanding your business to different franchise locations.

What is a franchise business?

What most of us picture when we hear the word franchise, the business format franchisee purchases a complete system. Franchisors typically provide everything from physical layout to employee training, equipment and supplies. Examples include restaurants, fitness centers and business services, such as copying and shipping.

What is a distribution franchise?

In a distribution franchise arrangement, the franchisee buys the right to use a trademark and sell the parent company’s product. Franchisees are not purchasing a business system but are incorporating a product into their own. Examples include gasoline, automobile tires, home appliances and farm equipment. A variation on the distribution franchise model is soft drink bottling, where the franchisee is involved in actual product production.

What is investment franchise?

As the name implies, investment franchises are designed to maximize returns or produce capital gains. They generally have a high buy-in and can be the least hands-on. Franchisees may install a management team of their own or turn day-to-day operations back to the franchisor. Hotels and large restaurants are examples of investment franchises.

How long can a franchisee open a business?

According to the FTC, agreements often restrict a former franchisee’s ability to open a similar business for as long as three years. It makes sense that the franchisor doesn’t want you to set up a similar business across the street—the secret sauce is called that for a reason. Just make sure you understand exactly what business activities you will be precluded from, once your franchise term is up.

How much does a mosquito squad franchise cost?

A Mosquito Squad franchise, for example, will not require a brick-and-mortar location, but the franchisee will need storage for the equipment and inventory included in the estimated $65,000 and $90,000 startup cost.

What are contingencies in franchising?

Is yours protected? Is there potential for the franchisor to shrink your customer base by creating another in your backyard? Contingencies—an increase in your territory’s population, for example, or your failure to meet a sales quota—might open the door for competition from a new player. It’s all fair, if it’s spelled out in the FDD.

Is a twenty year franchise term too long?

Conversely, for business owners on their second (or third) act, a twenty-year franchise term may be too long. Questions of termination—by the franchisee or the parent company—are addressed in the Franchise Disclosure Document (FDD). The key is to anticipate the issue of duration and make sure what’s spelled out in the FDD matches your vision of the future.

Know Yourself First

It’s a good idea before you being your search to be clear about your own requirements from a franchise so that you can examine opportunities in context:

What Do You Want From The Franchise?

People start businesses for very different reasons. Some franchise owners will want to take on a franchise to create a large revenue stream others will do it so they can dip their toes in the entrepreneurial scene and others will simply want to get a bit more free time.

Signs of a Good Franchise

Once you know what you want and how much you have to invest; you need to take a look at the franchises open to you in a little more detail. There are some strong indicators of a good franchise scheme:

Things to Look For in the Franchise Disclosure Documents

You will be provided with franchise disclosure documents (FDD) before you sign on the dotted line – you should review these carefully and ideally you should do that with a legal and/or financial advisor who knows what to look for. These are the bits you really want to focus on in the FDD:

Talk To The Franchisor

Once you’ve reviewed the FDD and got to the point where you feel you’re ready to make a decision – talk to the franchisor. Have a full and frank conversation about what they want you to bring to the table and what you want them to deliver in terms of support, backup, marketing, etc. to help you succeed.

Written by Lisa Huyhn

Lisa Huyhn is the Politics and Military & Defense Editor at BusinessPundit. She is a fiercely independent voter who believes in full transparency in politics & general government activities. You can reach her at OnlineDegree.com.