Is the home-based franchise for you?
Do you want to be a home business owner but cringe at the thought of starting from scratch?
Possibly a home based franchise is your answer.
A Franchise is a business in which “…the franchisor, the owner and developer of the franchise system, grants licenses [you] franchisees to use trademarks, service marks, logos or advertising owned or developed by the franchisor.” (International Franchise Association, Franchise Basics).
With some franchise programs, the business operates using only the franchisor’s brand name.
Other programs are less restrictive and allow the use of a trade name in addition to the franchisor’s brand name.
Common to all franchise programs, the franchisee[ you] You are responsible for paying the franchisor, advertising fees, startup fees, service fees, and royalty fees.
You are responsible for payment whether your business is profitable or not.
Additionally, many franchisors provide educational programs to franchisees prior to starting the business.
Many times, they have done demographic studies and other studies to ensure that you have a better chance of making a profit.
Main types of franchise
or Franchise Unit
It is the simplest type of franchise in which the franchisor grants the franchisee the right to operate a single operation in a specified location or within a specified territory.
o Area Development Franchises
Pursuant to a “development schedule,” the franchisee agrees to establish a predetermined number of “unit franchises” within a particular territory.
o Subfranchises/Masterfranchises
It is quite similar to the area development franchise with the main difference being that the franchisor gives the sub-franchisor the option of franchising the unit itself or selling the franchises to third parties. (Common with international franchises)
o Affiliate Franchises
This type of setup is typically used by an established business owner who decides to join or affiliate with a franchise chain.
This allows the benefit of the franchise brand. This is common with a lot of real estate.
or non-traditional
This type of setup is customized between the franchisor and the franchisee.
Franchises are not the same as dealers and distributors
A dealer or distributor differs from a franchise in that there is no FEE involved. Distributors usually purchase products from the manufacturer at wholesale prices.
However, keep in mind that a dealership can become a franchise IF a FEE is paid to the franchisor AND the dealer is dependent on the franchisor’s payment structure.
Considerations when buying a franchise
o There is a benefit to buying a franchise that is well known
o Will the franchisor provide ongoing education and support?
o Were demographic studies conducted?
o How many of the franchises have closed operations? Because?
o Have you REVIEWED the Franchisor’s Comprehensive Disclosure Statement? Prospective franchisees are required by law to receive full disclosure, a copy of the franchisor’s standard franchise agreement, audited statements, a list of the names of all franchisees, as well as a copy of all documents that require the franchisee’s signature. .
By law, each of the above must be provided at least 2 weeks prior to the purchase date.
o I’ve heard the saying, “if you buy a McDonald’s, be prepared to eat hamburgers for breakfast, lunch, and dinner.” In other words, your business requires commitment.
Additional sources of information
oSuccess Magazine
oInternational Franchise Association http://www.franchise.org
oFranchise Sales Press *Get this magazine as it is known for its focus on franchise opportunities. In addition, they conduct periodic interviews with both franchisees and franchisors.
oSBA Small Business Association
oStock brokerage firms and analysts Since the stock market information of a public company is useful.
or Franchise Lawyer
oPublic reference branch of the Federal Trade Commission
oUFOC “Uniform Franchise Offering Circular” – The material provided by law, by the franchisor to the qualified franchisee. This is probably the most revealing of all the information collected.
o Attorney General of the Republic
oBBB located in the city of the Franchisor’s headquarters.
oYour banker must have access to the Dunn and Bradstreet Report on the particular Franchisor.
oContact the franchisee of the franchisor listed in the UFOC. *** Prepare a list of relevant questions before calling.
Buying a franchise generally equates to a reduction in investment risks as the “system” and franchise name is established, ongoing training and support is provided, market research is conducted… On the contrary. ..
Franchise ownership can be expensive. Therefore, it is essential that you research the franchise thoroughly before purchasing it.
There is a continuous increase in the number of franchises. Obviously, there is a HUGE market for this method of business ownership. When approached methodically and practically, franchise ownership can be very lucrative and much simpler than starting a business from scratch.
Be wise and make sure you do enough research before committing.
If you need financial backing, you will need to create a business plan. There is a handy business plan workbook available on our site.
Bridging the gap between opportunity and success, OwnABizToday.com
Copyright 2005 Shawn Price
