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Is a Franchise Right For You?

Date: 02/12/2007 | Category: Business | Author: Diana Heeb Bivona

Many people bitten by the entrepreneurial bug decide to pursue a franchise instead of starting a business from scratch. As with any business venture there are pros and cons to buying a franchise. Deciding whether or not its the right option for you requires a lot of due diligence on your part and possibly a little soul searching.

One easy way to start the process of making the decision if a franchise is right for you is to ask yourself a few questions such as:

  1. What type of franchise is it? Is it a “package franchise” that comes complete with a business model laid out by the parent company? Or is it a “product franchise” that exist mainly to distribute the parent company’s goods. Generally, an owner of product franchises have more control over the way they run their business.
  2. What’s said in the offering circular?
    The Federal Trade Commission requires that franchisers provide specific information to potential franchisees including information on the company’s business experience, legal history, and its other franchises. Read the document carefully.
  3. How many franchises does the company currently operate? A large number of franchises indicates a successful, established business. However, be sure to note if there are any other franchises close to where you are looking to locate yours.
  4. How much? The initial capital investment required and the franchise fee will depend largely upon the franchise itself. Ongoing royalties can also vary and are usually calculated either as a percentage or a flat fee.
  5. Will you have the needed support? Support services can range from helping you select a location for your business, negotiating a lease, advertising for and interviewing prospective employees, getting business licenses, financing the franchise fee or equipment costs, or providing other services. Ask the franchisor what they are willing to provide and get it in writing.
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