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Home › Articles › Everything For Now › everything for now sub › Starting a franchise

Starting a franchise

A franchise is a legal and commercial relationship between the franchisor and the franchisee that allows the franchisee the use of the franchisors trade mark and conduct business under their name. The franchise agreement governs the way between the two parties on how to conduct the business. Franchising has existed since a long time. However, changes in the system and enormous growth have ensured that franchising has touched many aspects of our daily lives and products of daily use. Whether the product relates to food, legal services, automobiles and real estate franchising plays a role in the development. In simple terms a franchisor owns the rights to a trade mark or a name and sells the same for use to the franchisee. Generally a franchisee sells goods or services that are owned by the franchisor and meet the franchisors standards.

Starting a franchise needs many aspects to be considered. We will look at some of the aspects in this article. Attending a sales meeting for a franchise agreement is one of the primary things that you may want to do. However be cautious about the tactics used by the sales people. Remember that the franchisor wants to sell the name and trademark and is holding the meeting to suit that end. You on the other hand may not be suitable for the business.

Investment: Keep in mind the amount that you feel you can invest in the business. An exhibitor may tell you about the possible investment and the fact that the opportunity cannot be missed. Keep in mind the amount that you are comfortable in investing and the maximum that you can afford.

Is the business right for you? It is the exhibitors right to try and convince you that this is the best opportunity that may never again come your way. It is up to you to decide whether the same is right for you or not. Considerations about the type of industry and the amount of time that you may need to spend over the years may be an important factor before a decision is made.

Skills and background: Do you have the necessary skills and the background to enter the business? A franchise may look like an opportunity of a lifetime. If you lack the skills and background required to run the business well, you may find yourself in a bind over a long period of time.

Make sure that you compare the different offers that a franchisor makes before making a decision. You will be exposed to a host of tactics to ensure that you end up with an agreement. However, it is important that you consider the following;
• Length of time that the franchisor has been in the business
• The number of outlets under their sponsorship and their locations
• The initial start up fee and royalty fees if any
• The training and operating skills that the franchisor will impart at the start of the business
• The dos and don’ts that the franchisor may impose upon you

It is impossible to remember each and every offer that a franchisor may make and there will be many. Make sure that you carry a pen and a pad to make the notes required and raise as many questions possible to ensure that you have all possible information at hand. Do not be pressurized into tactics of hard sell. You may come across sellers that will tell you that this is a limited opportunity and may not be available later. Be patient with the knowledge that what exists today can also come up tomorrow.

Finally make sure that the franchisor is able to substantiate his claims about any earnings. The FTC requires that such claims are provided in writing at the time of any meeting. If the franchisor is unable to do so, chances are that the claims do not hold much ground and may need further investigation. After all it is your money and a substantial amount of time that will be invested in the agreement. You will need to be sure you have all the information at your finger tips before a step forward is taken.

Apart from the above also make sure that you consult lawyers and accounts who can brief you up about the franchise and make sure that you know what the total implications of investing in the business are. Government departments and the Federal Trade Commission will also be able to assist you in this matter.

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