The Ins and Outs of Franchising
June 02, 2017
By Antoinette Mirkovich, CPA
A franchise is a type of business structure that allows an individual to purchase the right of use for that particular company. The business owner, called the franchisor, licenses the right to operate a business using the franchisor’s business name to an individual (franchisee). Before purchasing a franchise, you should carefully consider what is entailed. Having a franchise means that your business is based on a successful idea, and you can use the business’ trademarks and brand names to help you enjoy a part of that success. As the franchisee, you’ll pay the franchisor a fee for a certain period of time. The fee may be a percentage of revenue or an upfront fee, or a combination of both.
Perform research on the franchise to make sure it is the right fit: Attend seminars and ask existing franchisees for assistance. Instead of purchasing a new franchise, think about purchasing an existing one. Consider how the business operates, and the location of the franchise. Have a solid understanding of the franchise agreement. Take advantage of the assistance given by the franchisor regarding set up of the business.
The price of a franchise can vary widely depending on the type of business. There are also costs for training and marketing. Consider the net profits of a franchise, all the different types of costs to run one and financing arrangements. When looking at the franchise’s financial information, carefully review the median income from a particular area, as income levels may differ in a geographic region. One particular franchise may have lower costs compared to other franchises.
Use your best skillset to help grow your franchise. If you need assistance in a particular area or role, hire a reliable and experienced person so you can focus on other issues. Even though the franchise provides resources, it is ultimately up to the franchisee to make it a success!