At FranchiseHelp, we get asked a lot of questions around franchising and how you can tell if a franchise is right for you! Here are six commonly asked questions potential franchise owners have when considering a franchise investment:
1. What is franchising?
In its essence, franchising is a way of being able to open your own business with the guidance and support of a larger parent company.
A contractual agreement is entered into by the franchisor and the franchisee. The franchisee agrees to pay an initial fee and royalties to a franchisor in order to use the trademark, business system, and sell the products and services of the franchisor, as well as complying with certain standards the franchisor puts in place. The franchisor provides access to the brand name, operational manuals, initial training, and some ongoing business support. Depending on the franchise, they may offer even more than this - ongoing training, marketing support, technology programs, and so on.
Franchisors do well when their franchisees do well, so it is in the franchisor’s interests to ensure their franchisees can thrive.
2. Why should I buy a franchise?
Buying a franchise is a great route if you are looking to become an entrepreneur but don't want the risk of starting a business from the ground up. There is a low risk and high revenue possibility in owning a franchise as well as brand awareness. Along with high profit margins, you are provided all the support and resources of a larger company. Owning a franchise gives you the independence of a business owner while offering guidance.
3. What are the benefits of owning a franchise?
Some of the most successful businesses across a variety of industries are franchises - it’s not just fast food chains! Buying a franchise is a great route if you are looking to become an entrepreneur but don't want the risk of starting a business from the ground up. As a franchisee, you benefit from the brand name, marketing, operational systems, and the products and services of the franchisor you work with. This gives you access to a wealth of knowledge on how to succeed in your business, giving you the independence of a business owner with the support of a bigger company’s resources and knowledge
4. How do I decide what franchise is right for me?
Given the wide variety of franchises available, it can feel overwhelming to decide which one to choose! We recommend narrowing down your options through our franchise quiz to get a set of personalized recommendations based on your interests, available amount to invest, and location.
5. How do I buy a franchise?
Buying and investing in a franchise is a process involving careful consideration. This process includes finding the right franchise for you, tailored to your skills and interests, within your budget.
Once you determine your franchise or franchises you are interested in, submit your information to the desired franchises and do your research. Find out anything and everything you can from competition, revenue, and their background. Explore the geographic location you desire to see if it is a good fit for your franchise and scope out what competition might be present.
Then you will undergo a discovery process with the franchisor where they learn more about you, you learn more about them, and ultimately you'll decide if you want to invest in the franchise! (More details in future blog posts on this process.)
6. How do I conduct a due diligence of a franchise system to decide if I should invest?
Once you’ve selected franchise systems to investigate further, you’ll need to do additional due diligence to determine if the franchise is as good as it sounds in its promotional materials and sales pitch! Things to look for include:
- Does the company have a good reputation?
- Is the company growing?
- Is the company well managed? Does it seem well organized?
- What are customers and franchisees saying about the company?
- Is the franchisor profitable? Are the franchisees profitable?
- How much would you need to invest and how long would it take to break-even?
There are many questions to consider around franchise ownership and doing your research is key to finding the best franchise for you.
Getting Started - What is a Franchise
Most of you are probably already familiar with franchises. You may even patronize a variety of franchised businesses without realising that they are franchises. These businesses range from car servicing and financial services to yogurt and home repairs. According to the International Franchise Association(IFA) franchises employed nearly 9,000,000 Americans in 2015 and generated nearly $880 billion. Franchising is difficult to escape.
But she's doing it: Can franchisors treat franchisees differently?
So, what do you do, then, when your fellow franchisees start using rougher towels, or take the milkshake off of the menu? Now all of a sudden some of the inherent value in your franchise is gone. Your hotel chain is seen as declining in value, and out-of-towners stay away because they think that you, too, have taken their favorite milkshake off of the menu.
Get Your Franchise Audits and FDDs Done Early for Renewal Season
Renewal season means different things for different people. Here are a few important tips to keep in mind: