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Buying a franchise appeals to people who want to own and operate their own business but would rather avoid the effort involved with launching a new start-up. Before you purchase a franchise, however, you would be well advised to do some preliminary research first. These tips can help you choose a franchise to buy into and ensure that you achieve the professional and financial success you want.
Do A Comparison Shop
Just as you would before buying any product or service, you should comparison shop before deciding what franchise to purchase.
Your comparison shopping should start by you requesting a copy of each business’ Uniform Franchise Offering Circular. The UFOC more than likely will be a lengthy yet informative collection of information that will offer details like:
- Annual revenue per franchise location
- Formal expectations of franchisees
- Three-year percentages on franchise turnovers
Along with obtaining a business’ UFOC, you should continue comparing franchises by researching each company’s bankruptcy and litigation records. These records must by law be disclosed to the public. You should avoid brands that high rates of failure, loan defaults, and franchise turnovers.
Make Research Prices
Another important step in choosing the right franchise involves finding out how much it will cost you to get one of these businesses up and running. Some of the costs that you should learn about include:
- Startup expenses, including costs associated with rent, purchasing equipment and inventory, and franchiser opening fees
- Royalty fees based on weekly or monthly gross amounts
- Advertising costs
- Early termination and other contractual expenses
It can be particularly important for you to know upfront whether or not you will be expected to pay royalties even if the franchiser fails to provide promised support or services as well as if your contract is terminated early.
Look For The Best Franchiser Controls
Buying a franchise largely gives you the experience and satisfaction of owning your own business.
However, you still must abide by the franchiser’s wishes when it comes to the everyday operation of your location. Your franchiser may exercise control over your franchise business’:
- Site and location
- Design and appearance
- Goods and services that you can sell to customers
- Bookkeeping procedures
- Discounts and sales
The franchiser may also stipulate from what vendors you can buy inventory. Perhaps most importantly, your franchiser could influence your profits by controlling your operational territory. This individual could get the final say on whether or not other franchises can open close to your location and what kinds of products and services they can sell that may take away from your location’s financial success.
Likewise, the franchiser can mandate the terms under which your contract can be renewed or terminated. You should find out all of these control factors before you buy into a particular franchise.
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Self-Evaluate Franchise Suitability
Finally, you should evaluate to what extent you are prepared to buy and operate your own franchise. At first glance, the prospect may seem easy and even exhilarating to you. In reality, it may involve a lot more work and money than of which you are aware.
You can start your self-evaluation by determining how much money you have to invest and possibly lose in a franchise investment. Just as with running any business, there is no guarantee that your location will be successful and provide you with the income you need to sustain yourself and your family. For that matter, do you have money set aside to live on until your franchise takes off and starts to make a profit?
In regards to finances, you also should determine whether you will have the money needed to buy a franchise or if you will need a small business loan. A significant factor of being approved for a loan centers on your personal credit score. You should find out what your score is before deciding whether or not to purchase a franchise.
A franchise may also require that you have some sort of experience or special training. Do you have the qualifications needed to run a successful location? Franchisers do not have to provide training to franchisees and often expect these individual to have the required level of talent to get a location off the ground quickly and successfully.
These tips all should come to mind as you prepare to buy a franchise. Heeding these strategies can ensure that you buy into a brand that will give you the entrepreneurial satisfaction and success you want. They also will protect you from devastating financial losses.