The franchise agreement should spell out all initial and continuing training
obligations of the franchisor in detail. You should also query the franchisor
about the following:
The U.S. Labor Department's Bureau of Labor Statistics recently conducted a
survey of home-based businesses and estimated that there are just over four
million self-employed, home-based workers. (The number of franchised
businesses in this total was not calculated.) However, the National
Association of Home-Based Businesses, in Owings Mills, MD, puts the number at
closer to 50 million people. Whatever the accurate number is, it is a number
that everyone agrees will only continue to rise.
There are basically two types of businesses that can be offered by an
individual. They can offer Products to their customers which are tangible
goods meant for the customer's consumption or they can offer them Services
which are intangible and work to make the life of the consumer easier and more
convenient. With technologies advancing rapidly and the global demands of
consumers changing there is a very thin line dividing the service and product
segment of the consumers demands. An example of this can be the purchase of a
car from an auto dealer. The dealer not only offers the vehicle at a
competitive rate but now has to offer different services as well, such as
financing options, after-sales services, ready documentation and other non-
tangible services. This kind of merging has made it very difficult to draw a
clear line as to the service and product industry but for the sake of argument
we will consider a theoretical perspective where you have to choose a
traditional product franchise or a service franchise.
At its core the decision to open a franchise isn’t a trivial decision. You
are making a serious investment, but if you take all of the factors into
account it can be an amazing one. But before you get there you need to sit
down, analyze your needs, capabilities and limitations in relation to a
franchise business. This could take a few days to consider or a few weeks or
months. In either case, it is one of the most important steps in the
franchising process, so don’t skip it.
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.
Once you've found a franchise (or multiple franchises) that you are
interested, the real research and diligence process begins. You need to figure out whether the franchise you are looking at really makes sense for you from a financial and lifestyle perspective. Your best source of information for all of this is the Franchise Disclosure Document, or FDD.
When people think of the costs of opening a franchise they typically just
think about the franchise fee. That makes sense, seeing as the franchise fee
is typically a substantial cost, ranging from a few thousand to a few hundred
thousand dollars. But, this isn't the only payment a franchisee needs to make
to the franchisor. Once operations start a franchisee typically needs to pay
some form of ongoing royalties to the franchisor.
Now that we’ve discussed the franchisor’s point of view and arguments towards
negotiating the franchise agreement, here are a couple of tips for not wasting
time on trying to negotiate items which franchisors do not alter and
concentrating on the change-able clauses in the Franchise Agreement.
Owning your own business has always been a linchpin of the American Dream.
With the advent of franchising, prospective owners now face a choice between
running an independent business and operating their business unit as part of a
franchise system. Put differently, they can launch a brand new restaurant
churning out specialty cakes and ice cream sundaes, or open a Cold Stone
Creamery location. Determining the right option for you comes with some
complexities, but there are a couple of primary factors to consider: Your risk
tolerance and your personality type.