Starting your own business can be fun and exciting, but also very challenging. Sometimes it might be easier to go with a tried and true formula instead of starting from scratch. One way of doing that is by buying a franchise. Many times, your initial start-up costs will be less and you will have a proven brand, marketing and support system to back you up.
This may all sound ideal, but not all franchises are created equal. Here are some basic steps you will need to take when considering whether or not a franchise is right for you:
Do Your Homework
This does not just mean eating or shopping at one of the existing locations. Find out how long the franchise has been around, how profitable it is, whether or not you will get to use the trademark, what your responsibilities will be, what kind of training and support it offers and more. The more you know about a particular franchise, the better off you will be in making a decision. Talk to current franchisees as information about their first year in business and their experience with the franchisor can be extremely enlightening.
Seek Legal Advice
Every franchise you consider will have a Franchise Disclosure Document. Within this FTC-mandated document is everything you need to know about the business side of a franchise. You should review the entire document with an attorney who has experience with franchises before making any decisions. You and your attorney should carefully review the franchise agreement, the lease or real estate agreements, and any other contracts. First, make a list of questions to go over with your attorney, and then present your concerns to the franchisor. Get the franchisor’s clarifications in writing. There may be very little that you can change in these standardized agreements, but things can be added.
Have Enough Money
Make sure you have enough money to pay the up-front franchise fee that most all franchisors require plus the start-up costs. If money may be an issue, research which brands may offer some sort of financing plans. Understand what the potential compensation may be for you. Some brands may take a year or two before the owner starts earning the average compensation. You will need to have enough reserve funds to get you through this time period. You should realistically expect to make slow and steady progress as you start out, instead of catapulting to the top financially right away.
Do not go it alone when considering a franchise. Work with an attorney with experience in franchise law as they can help you navigate through the often confusing world of franchises.