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Things To Consider Before Buying A Franchise

Updated on June 24, 2013

5 Things You Need To Know About Buying A Franchise Business

When you have selected for yourself a business franchise that you wish to buy, you need to focus on some important and pressing matters.

I could have given you general and specific guidelines to consider, but each and every franchise operates in different manners. To save you from all that trouble and pain, here are some of the things that you need to consider when purchasing a franchise.

Understanding Your Legal Rights

Know the legalities: Study the legal process. Better yet, arrange for a solicitor before buying a franchise. He can go through all the legal issues surrounding a franchise contract and give you valuable advice to consider while buying a franchise. The solicitor in most cases might point out anomalies in the contract you might be signing and you might have a reason to discuss them with the franchiser.

Make Sure You Aware Of The Financial Position Of The Franchise Company

Study financial models: When purchasing a franchise, make sure that you acquire as much information as possible about financial models from the franchiser. There is no better way of understanding how a franchise business would work. Study these models and service routines carefully. Make sure you understand how they can serve your purpose.

Talk To Your Bank About Available Finances

Financial prerequisite: When uncertain about certain details of the payment you're paying, you might want to give your bank a visit. If you are to take out a loan, you'd still need to fix a scheduled meeting at your bank to discuss about the franchise.

The advisers at the bank can help you heaps about your circumstance and give you important advice. Getting your loans approved should be the least of your worries; you need to hire some help to project your financial strategies and numbers to understand how much you actually would be profiting from this venture.

Where Your Franchise Boundaries Are

Territorial supremacy and other such factors: Operating requirements for a franchise might dictate your decision to run a franchise from a certain territorial or geographical placement. You need to know what options you have available to you. No franchise would allow operations under the same company to be run adjacent to each other.

Understand this fact and try to see if the locations available to you are suitable for you. You should make a serious effort in obtaining the most promising premises for your business.

What Sort Of Training And Support is Available

Initiation packages: Finally, if you are you are completely satisfied with the complete process; ask the franchiser, before signing the contract, about what sort of help he would be providing you in the initial phases of the business venture. Would he be providing you with equipment, service training and manuals, that secret recipe, etc.

You should be able to openly accept any offer if you are satisfied with the above major considerations. If you think you can handle the business from the moment you sign the contract onwards, you are ready to blast your way through to a prosperous future.

A franchise is a great way to own your own business without the headache and stress of trying to figure out the nuts and bolts of how to make it work organizationally. It also gives you the added security of branding.

Buying A Franchise During The Recession

Times are tough and people are losing their jobs at an unbelievably alarming rate.

Just like the plague that eat through Europe in the fourteenth century, recession is spreading to every corner of the globe. In such times, you would not be the only person considering spending miserly.

In fact, you would be considered stark, raving mad if you try considering buying a franchise. Where buying out of debt seems viable, buying your way into a new business is just plain ridiculous.

Buying a franchise might, however, just present you with an easy way out of your distress during this time of the recession. Franchises have proven to be a quick, steady and short way to success. Even in financial crises, buying a franchise can sometimes help; but, you need to know where to look and what franchises to go for. Think of the fast-food restaurant franchises.

Even in the darkest times of the recession, franchises like Kentucky Fried Chicken and McDonalds were showing signs of growth. It depends on the type of industry you look into when purchasing a franchise to effectively stay abreast in the waters of recession. Where no business is recession-proof, industries such as low-cost fast-food restaurants, discount retailers and child-care companies, show steady signs of growth.

It is usually the businesses providing necessities to people that tend to survive the economic climate more than any other such industry. Following are some of the categories of franchise industries to look out for in the recession.

Affordable retails: Consumers try spending less and less when the recession is around. Instead of spending on pricey meals or necessities, they would try spending on things that are cheap and affordable. If you happen to come across such a franchise, do not think twice before buying it. Companies like McDonalds see a growth in demand as people wouldn't be visiting expensive eateries and restaurants. Departmental stores like a discount retailers might also not be affected in the times of a recession.

Services businesses: Accidents happen and services businesses that serve people in time of an emergent need like a plumbing technician, an automotive repair company or such might just fill in the gap. Such services companies do not get affected in the recession because they are paid forth by third-party insurance agencies eventually and are not worried about not getting paid.

Child-care and pet services: Companies that offer services for children or pets usually survive in the hardships of the recession. Everyone needs these services for their kids and furry friends.

So, the next time you are thinking of buying a franchise in the hard times of a financial crisis or a recession, try giving the above industries a shot. These industries are businesses that are always needed, no matter how tough times may get.

By investing in one of these types of industries you're bound to get a good return on your investment. There are many other businesses that fall into this similar category. Take time to brainstorm a bit and see what you can come up with.

What Can You Expect?

Buying a franchise is often considered to be imperative to a quick success and a shortcut to reaching an established customer base.

Where this might be true for some franchise operations, for others, immediate success doesn't follow as expected. Now that you are thinking of buying a franchise, here's our analysis of what you could be expecting from the endeavor.

When you are thinking of buying a franchise, you no doubt have been thinking about how less the chances of failure are in an already established business. This summation is a result of thinking that all franchises appear out of the blue with an established brand, and a following of a customer base.

Eventually you begin to think that a franchise is far better than starting an independent business. Where the latter start ups stand more than 70% chance of failing in the first few years, a franchise might just stick on longer. But, you should know that when you buy a franchise you actually have to operate by the rules of the franchise – their service manual.

Do not ever compare a franchise with business where one can be their own boss. In a franchise, even though you own the rights to the operations, you are still bound by the rules and limitations set by the franchiser.

People also opt for franchises because they think that when they will buy a franchise, they will receive a welcome start-up package which would provide them with equipment, training session and a packaged customer base to operate with. Well, this usually isn't so. Some franchises come with just that.

They will provide you help in starting up the business but after that, you are left to your own mercy. And on top of that, you have to provide the franchiser with a regular payment cut out as a percentage of your income, sales and profits. Ask yourself if you are actually willing to take that risk.

Buying well known franchises, like McDonalds or KFC, can be very profitable indeed. But, if you buy a franchise that is relatively unknown to the customers of the geographic region that you would be serving, ask yourself if the whole process is worth going through.

Although, the cost would be low but you would still be swimming with the sharks in such a circumstance. Most franchises are merely start ups themselves. Where they can provide you with an opportunity to start your own business with lots of help, they would expect you to present them with steady revenue. Are you willing to take that risk?

Every franchise is so different that it is essential for you to adequately research the details of each one. Don't go off the information you receive about one and assume it to be true of another. Take time to know the facts before committing to something.

You can talk with other owners of a franchise you may be interested in to find out the nitty gritty of the daily operations. The more you know, the less likely you will be surprised when you do chose a particular franchise to buy.


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