"Buying" A Franchise
Here at FranchiseHelp we’re constantly asked about the opportunity to buy a franchise. Unfortunately I’m going to have to tell you something that might disappoint you. You can’t “buy” a franchise. In reality you are engaging in a “leasing” transaction rather than a “purchasing” transaction. Why is it a lease? In any franchise deal, the franchisee receives the assets up front, but only for a period of time - the term of the franchise agreement. The term of the agreement may run for five to ten years, or in some cases it may run for as little as a year or two. At the end of the day the renewals of these agreements are at the option of the franchisor, and the reasons for not renewing an agreement should be completely spelled out in the Franchise Disclosure Document (FDD) and franchise agreement.
So what doe it means that you are leasing and not purchasing? This might not influence your decision to become a franchisee, but you should definitely keep this in mind while you are analyzing your choices and negotiating with potential franchisors.
There are other important considerations as well. First, you must determine if you would function well as a franchisee. If so, you then have to choose the right franchise among the 3000+ franchise opportunities out there. That’s only the beginning. After you whittle your franchise choices down to, maybe, a half dozen, you must then thoroughly investigate each opportunity. Once the choice is made, your job is to analyze and understand the franchise agreement and, if possible, negotiate the agreement so it is satisfactory for both you and the franchisor. Finally you need to put together a financial package to fund your franchise investment.
We put together this site to help you understand the ins and outs of the franchising process and to help you identify the perfect franchise for you. Click below to start exploring the franchising process.
Prospective Franchisees - The Financial Questionnaire
The first qualification considered and investigated is often the prospect's financial situation, so as a franchise applicant you will need to be familiar with the financial jargon that a franchisor may employ in their questionnaire.
Franchises vs. Startups, What Makes More Sense for You?
In order to decide which alternative (franchise vs. standalone startup) is the wisest choice for you, you need to understand the advantages and challenges of both options.
Why Doesn't Chipotle Franchise?
I’m a huge Chipotle fan and I’m not ashamed to admit it. I love a big fat carnitas burrito with every possible topping (is that even the right word for what you put on a burrito?) on it, especially guac. But every time I’m outside of New York I wonder why there aren’t more Chipotles out there. Sure there are a bunch (at the end of 2014 there were more than 1,700) but their numbers pale in comparison to other “fast food” giants like McDonald’s or Subway (they have more than 36,000 and 43,500 restaurants respectively). So why hasn’t Chipotle followed suit and gone the obviously successful franchising route?