Many people who want to start their own business will invariably buy a franchise. This is a smart business move as franchises offer many advantages, particularly for beginners with limited business experience. These include: franchise tax benefits, low start up costs, potential long term partners, financial leverage, business models compatible with your personal interests, good relations with existing franchisees and the ability to start and run your business on a shoe string budget. However, before you invest in a franchise, research well. Read this article for tips on evaluating franchise opportunities before you buy a franchise.
As the internet has opened up a global marketplace, buyers and sellers can enter into direct sales and franchise opportunities that offer products or services from different countries. Before buying, be sure you are familiar with all franchise laws and requirements for buying and selling, as well as any other import/export requirements you may need to comply with. Also, before buying any franchise, conduct thorough research on the market to assess the opportunities available. When you buy a franchise opportunity, you can sell goods and services which have instant brand recognition, have long term support and service, and be able to successfully operate on a shoe string budget.
Before buying, do your due diligence and research. Look at the quality of the franchise opportunity and franchisors by doing a search on Google. If you are planning to invest in a specific niche, such as restaurants, coffee shops, fast food, or automotive repair, check with franchise specialists and associations for information on the reputation of the franchise industry. Also do a little research into the background of potential franchisees, especially those with a demonstrated track record of success, as well as their credentials.
Before deciding on a particular franchise business model, identify the franchisee’s strengths and weaknesses and determine what resources the franchisee can acquire to build a competitive advantage. This includes access to training programs, human resources, marketing resources, high-tech manufacturing equipment, quality software, and the ability to source parts or components, and trainings that teach franchisee operators how to use these resources to compete successfully. Remember, the goal of franchising is to enable a franchisee to create a large customer base by creating localized markets. Identify franchise business models that are likely to be successful for your area. For example, if you live in the San Francisco Bay Area and are interested in purchasing a franchise outlet in that area, identify restaurants that fit your demographic and do a preliminary analysis of the competition. Find out from the franchisor whether they offer training programs to help franchisees learn the skills necessary to market their business effectively in that market.
Once you’ve evaluated potential earnings and profitability, it’s time to evaluate potential environmental issues. Before buying, seek out the most efficient solutions for cleaning up spills or ensuring water safety. Evaluate the impact of new technology on environmental impact. Will new innovations lower costs and make the business more profitable without negatively impacting environmental performance? In some cases, the answer will be yes; in other instances, the answer may be no.
When evaluating potential franchise opportunities, take care not to sign an employment agreement until you understand all the risks, rewards, and obligations associated with the franchise. Before purchasing a franchise, ask if the franchisor reserves the right to sue you for breach of contract, or breach of implied warranties of merchantability, fair play, and similar claims. Before signing any franchise agreement, make sure the franchisor has provided you with all the appropriate documentation and that you understand all the conditions, including an operating agreement, sales agreement, and other legal terms and conditions. As you examine potential franchise opportunities, it’s important to remember that the ultimate responsibility for resolving any conflict lies with you; therefore, it’s critical that you work diligently to minimize conflicts with your franchisor.