Looking to invest in a franchise?

Let’s start with the basics. Below are questions every potential franchisee should know the answer to before taking the plunge into small business ownership.

What is franchising? Franchising is a form of business organization where a company (the franchisor) enters into a continuing contractual relationship with other individuals (franchisees) operating under the franchisor's trade name and with the franchisor's guidance in exchange for a fee.

Why do people choose franchise ownership as opposed to starting a business from scratch? People choose franchising to reduce their risk. Franchise owners have a higher success rate than those starting businesses from scratch because the franchisor has proven operating systems, marketing strategies, training, support, buying power and expert knowledge combined with a network of other owners for new franchisees to model their businesses after. Another big reason a franchise owner has a greater success rate is that the franchisor teaches the owner how to work “on” the business – managing, marketing and growing the staff – rather than “in” the business – working the register and answering the phones – as most independent owners do.

With so many different franchise systems out there, where does one start? If someone has an interest in learning more about franchise ownership, franchise consultants can offer the chance to work with a high-level franchise executive to learn the pros and cons of different types of franchise models while determining what concept is the best fit for their unique interests and skill set. Most people start by looking at businesses they have a passion for and experience or education in but these types of businesses are typically the ones that don’t make any money. The franchise concepts with the best economic models are the ones most people are unaware of or skip right over because they look at them from the wrong perspective (as an employee instead of an owner). What’s great about working with a franchise consultant is that there is no cost: Like a realtor or recruiter, they get paid by the franchisor only if their client decides to move forward.

What can one expect in terms of funding and investments? Individuals looking for a business on their own typically choose retail-type concepts where there is a store front with a sign that says what they do. When individuals utilize the services of a franchise consultant and learn about all the options available to them, many change their minds because there are so many great non-retail businesses that are in the service sector and business-to-business sector that cost half as much and break even a lot quicker. This puts money in the franchisee’s pocket faster because they have far less overhead expenses of a retail location. There is no correlation between how much money a business costs and how much money it makes: In general, a retail concept may cost anywhere from $200,000 to $500,000 and non-retail concepts will cost around $100,000 to $150,000. Qualified individuals that meet the franchisor’s financial criteria can typically get about 70 percent financing. Many people in today’s environment are using 401(k) or retirement funds to get their businesses off the ground because there are fewer penalties and tax distribution costs.

What if someone has no prior experience as a business owner? Is franchising still a good option for them? Experience isn’t necessary; in fact, many franchisors prefer new franchisees with backgrounds outside their industry. The franchisor has the training and systems to help anyone achieve success as long as they have the desire to succeed and the willingness to follow a proven system.

	Looking to invest in a franchise? Let’s start with the basics. Below are questions every potential franchisee should know the answer to before taking the plunge into small business ownership. What is franchising? Franchising is a form of business organization where a company (the franchisor) enters into a continuing contractual relationship with other individuals (franchisees) operating under the franchisor's trade name and with the franchisor's guidance in exchange for a fee. Why do people choose franchise ownership as opposed to starting a business from scratch? People choose franchising to reduce their risk. Franchise owners have a higher success rate than those starting businesses from scratch because the franchisor has proven operating systems, marketing strategies, training, support, buying power and expert knowledge combined with a network of other owners for new franchisees to model their businesses after. Another big reason a franchise owner has a greater success rate is that the franchisor teaches the owner how to work “on” the business – managing, marketing and growing the staff – rather than “in” the business – working the register and answering the phones – as most independent owners do. With so many different franchise systems out there, where does one start? If someone has an interest in learning more about franchise ownership, franchise consultants can offer the chance to work with a high-level franchise executive to learn the pros and cons of different types of franchise models while determining what concept is the best fit for their unique interests and skill set. Most people start by looking at businesses they have a passion for and experience or education in but these types of businesses are typically the ones that don’t make any money. The franchise concepts with the best economic models are the ones most people are unaware of or skip right over because they look at them from the wrong perspective (as an employee instead of an owner). What’s great about working with a franchise consultant is that there is no cost: Like a realtor or recruiter, they get paid by the franchisor only if their client decides to move forward. What can one expect in terms of funding and investments? Individuals looking for a business on their own typically choose retail-type concepts where there is a store front with a sign that says what they do. When individuals utilize the services of a franchise consultant and learn about all the options available to them, many change their minds because there are so many great non-retail businesses that are in the service sector and business-to-business sector that cost half as much and break even a lot quicker. This puts money in the franchisee’s pocket faster because they have far less overhead expenses of a retail location. There is no correlation between how much money a business costs and how much money it makes: In general, a retail concept may cost anywhere from $200,000 to $500,000 and non-retail concepts will cost around $100,000 to $150,000. Qualified individuals that meet the franchisor’s financial criteria can typically get about 70 percent financing. Many people in today’s environment are using 401(k) or retirement funds to get their businesses off the ground because there are fewer penalties and tax distribution costs. What if someone has no prior experience as a business owner? Is franchising still a good option for them? Experience isn’t necessary; in fact, many franchisors prefer new franchisees with backgrounds outside their industry. The franchisor has the training and systems to help anyone achieve success as long as they have the desire to succeed and the willingness to follow a proven system. Will Social Media work for your Franchise? Taking Advantage of the Support from Other Franchisees So you want to own a food franchise? Staying on top of leads Booming into franchising A new outlook for a new year Looking to invest in a franchise? What are some common myths in franchising? 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Looking to invest in a franchise?

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