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[H907]How To Buy A Franchise

by Jeff De Lara, Jef

Usually individuals wanting to strike out on their own were never responsible overall for: sales, marketing, human resources, customer service, quality assurance, operations, legal compliance, accounting, and much more. When owning a business, including a franchise ALL of those roles will often be carried out on a daily basis.

In principle owning a franchise will reduce the risk of not having conducted many of those roles for those brave individuals who ultimately decide to become a franchisee. The foundation of business format franchising is that the franchisor has developed a system, which has been proven successful, which can be duplicated by others …being franchisees.

When a business, whether it be associated with food, automobiles, building, or consulting (there are 75 franchise industries) decides to grow by franchising vs. a product or service distribution scheme, that business must develop documented systems which have contributed to that business’ prior success, and which can be replicated by its future franchisees. The new franchisee will be trained and provided with, or access, to manuals covering the mission critical functions referred to earlier.

Selecting the franchise in itself is a serious and time-consuming process. While many new franchisees select a franchise after having a personal experience at a franchise outlet, most use the Internet to search for a franchise to buy. Since 2000 online franchise directory web sites have proliferated. While many are just bulletin boards, other web sites like Franchise.com more full information on each franchise opportunity and its requirements. When interested in one or more franchises of interest, one simply completes a request for further information form with their personal information on how to be contacted by the franchisor.

While some companies want only basic information, others will want the candidate to provide much more since they do not want to waste their time. Some companies receive literally hundreds of leads daily from seemingly interested prospects, many of which are not qualified to own their franchise. Expect to receive a phone call from the franchisor, and if you are genuinely interested in becoming a serious candidate, then it is imperative that you respond, in order to be considered a genuine contact.

There are SO many franchises to consider how can you choose which one may be best for you? First have some knowledge of your financial capability. Do you have capital available to invest? Don’t forget the possibility of obtaining additional capital for the investment from a loved one or a friendly investor.

Next, think about what you like to do, and what you do not like to do, and choose accordingly. If you don’t like working with the public, then a retail business should not be considered. If you like working with children, animals, crafts, or involvement in sports, then target a franchise in that matching category.

After you speak with the franchise representative, if you are still interested, and if the franchise is interested in you, then you will be requested to complete a formal franchise application, which will involve typically a credit check and sometimes a background check. If you meet the franchisors guidelines, then to move forward then by law the franchisor is required to send or provide to you a disclosure document, known as a Uniform Franchise Offering Circular (UFOC).

Read the UFOC carefully since it will include a vast amount of information on the franchise such as: history of franchise and its key principals, financial statements, litigation, franchise openings/closings/terminations, franchisee contacts, franchise agreement, requirements, and more.

One of your key questions to the franchise representative early on may be “how much can I make". By law a franchise salesperson cannot provide you with an Earnings Claim, unless it is included in the disclosure document. There is no legal requirement that the franchisor must provide you with an Earnings Claim, however some franchisors do provide it. If the franchisor has chosen not to provide it, then it remains important to contact other franchisees listed in the disclosure document. Other franchisees can answer many of your questions. Many franchisors will also require you to visit their headquarters before signing the agreement, so that you can both get to know each other better. This is known as Discovery Day.

Ultimately your new business’ profit or loss will be determined by such factors as your franchise territory, site location (if not home based), and your individual efforts and commitment to following the system. While you will be your own boss, when owning a franchise you will not be “on your own". The franchisor will have also committed to fulfill their promises to you as stated in the franchise agreement.

Most people, who do start a business by themselves, end up failing and losing a lot of money. I now that this is a sad fact, but it's true!

If you start a business on your own, you have to make all the decisions regarding location, layout of premises and find and vet all suppliers.

With a franchise business, the franchisor will advice you on all the above. In fact, you might even find that you are told where to locate your business, who your suppliers are and have some choice in pre designed layouts.

A franchise business provides you with the consistency and quality throughout the franchisors territory. This leads to higher levels of customer satisfaction. The franchisor provides full training and support in running the business. If a site is required, the franchisor will assist the franchisee in selecting a site that fulfils the demographic requirements of the product.

A business start up has to learn from trials and errors until they hit on a formula that works. They have no training or support in managing their business opportunity. If any thing does go wrong, and in most businesses, it does, then they have no one to turn to for advice. The advantage they have is that there is no one looking over their back, telling them what to do and how to run their business.

The franchisee benefits from national marketing which is spread out amongst all the franchisees, enhancing the economies of scale. New products can tested in certain territories before they are rolled out nationally.

A new business will have to trail any new products with their own capital and take the full brunt if the experiment fails!

The relationship between a franchisee and a franchisor is well balanced. Both parties need each other to survive and create a profit. Ongoing support and training is usually available for franchisees who are struggling. Due to the higher success rate, banks are inclined to lend a higher percentage of start up costs in a franchise business then they are to an independent start up. They are also more likely to give extra leeway when more funds are required.

If you have decided to go down the franchising route then it is important that you choose a franchise that is right for you. Don't just go for the opportunity that will make you the most money, instead, choose a business niche that you will enjoy.

Decide how much capital you have to invest, and then choose the franchise opportunity that best fits your lifestyle. Decide how many hours you want to work and how many employees you are capable of handling.

Once you have made up your mind to buy a franchise, always have a contingency fund as there are always unexpected costs that arise in the initial years of running a business.

If you decide to go it alone, make sure you speak to other people running the same type of business in other parts of the country and learn from their experience. You will find other businesses in the same field as you more then happy to part with their experience once they realise that you are not going to compete in their territory.

Make sure that you take professional advice before deciding to follow the franchising route or starting a business on your own.

Article Source : Buy a Franchise

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Both Jeff De Lara & Franchise Opportunity are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Jeff De Lara has sinced written about articles on various topics from computers and the internet, Skin Care and Computers and The Internet. To know more information about the subject of franchising in the philippines, visit To know more about this article, visit. Jeff De Lara's top article generates over 90500 views. to your Favourites.

Franchise Opportunity has sinced written about articles on various topics from Small Business, Adventure Travel and Buy a Franchise. Naz Daud is the founder of CityLocal Franchise Opportunity. Franchise Opportunity's top article generates over 60500 views. to your Favourites.