Fundamentals of buying a Franchise Business

Fundamentals of buying a Franchise Business

Often, the thought of buying an existing business really isn’t right for you. But then the idea of starting from scratch can be equally scary and probably all too hard. If that sounds like you, then a franchise could be the perfect thigns for you! Question is, how do you find the right one?

How it works is a Franchisee pays a royalty fee to a Franchisor to provide all their business needs. Everything the business needs to get up and running. All the systems, marketing, support and training, provided from an existing business model that has been proven to work by existing companies.

The well known brand name is just the start. Buying a franchise gives you other advantages as well. The knowledge, know how and often all the equipment required is provided as part of the fee you pay.

The new franchise model helps business owners avoid the mistakes that start-up owners have to go through, it’s all been perfected already by the franchisor.

The more reputable and well known franchisors do a lot of market research before offering a new franchise up for sale, to ensure the highest level of success before they open their doors. If you’re buying into one of those franchises, then you’ll have great confidence that it’s the right thing to do and you’ll be supported by your franchisor. It also helps you get a clear picture of where the business is going and how you’re going to get there.

The final big benefit is the strength in numbers. You’re not alone when you buy a franchise. You’re one of a number of businesses who all share the same brand name, brand awareness, buying power and customer relationships. It helps you immensely as you have something to fall back on if and when times get tough.

Is it a Franchise or a Business Opportunity?

Business opportunities are less structured than franchises, so the definition of what constitutes a business opportunity isn’t easy to pin down. In essence, a business opportunity is any package of goods or services that enables the purchaser to begin a business and in which the seller represents that it will provide a marketing or sales plan, that a market exists for the product or service, and that the venture will be profitable.

An important consideration is that business opportunities and franchises are different. Sometimes the definition can be difficult to understand but the impacts to you personally are quite important.

If you’re talking to someone about a business opportunity, what you’re discussing is what goods and services will be delivered by the business, how it will be marketed, where the customers are and the fact that a market exists for a product of service. Primarily, whether the business will infact be profitable or not.

This is different from a Franchise.

Some other key factors:

  • A business opportunity doesn’t generally feature the seller’s trademark; buyers operate under his or her own name.
  • Business opportunities tend to be less expensive than franchises and generally don’t charge ongoing royalty fees.
  • Business opportunities allow buyers to proceed with no restrictions as to geographic market and operations.
  • Most business opportunity ventures have no continuing supportive relationship between the seller and the buyer; after the initial package is sold, buyers are on their own.

The Positives

One of the largest benefits of a franchise is the ability to bring independent business owners together under one brand and one trademark. Doing this gives a reach that each smaller business on their own could not achieve. The benefits of doing this are obvious. Unified customer experience, brand awareness and affinity, customer expectations are unifrom, greater advertising and marketing budgets.

Looking at things from a personal point of view, there are benefits for the individual too. The risk of a business failing is reduced when you’ve bought into a franchise, the franchisor is there to support you AND you’re using a business model that has already been proven to work.

You’ve got a name that people recognise, group buying power and in a lot of cases probably people doing the customer acquitision for you, so all you need to do is service them and make the money!

Ongoing training and support ensure that you and your team are always up to scratch, which is something that you don’t need to take care of yourself – you would if it was your own business!

The Good Stuff

  • Much lower risk
  • You get started immediately
  • Everything is standardised so you don’t need to develop anything new
  • Buying power of a larger group
  • You’ll get help when you need it
  • Nation wide advertising
  • Additional marketing and advertising material
  • All packaging and collateral is set
  • Continual development of the business not at your expense
  • You’ll get help with the money
  • People will help you with site identification
  • All the manuals come with it!

The Drawbacks

Franchising isn’t always for everyone. If you’re the type of person who is fiercly independent and doesn’t like working under the rule and remit of someone else, then you a franchise may not be for you. The strict operation requirements and specifications of a franchise business may be prohibitive.

Similarly, not all franchise businesses are created equally. Some require larges amounts of capital to get started (McDonalds!) others can be cheap but built on flakey foundations that then mean your investment is at risk from the start. Always check to see how well the system is setup, and how reliable the business has been over the past years.

The Downsides

  • You don’t have the control
  • It’s a contract and you’re bound too it.
  • Any problems that the franchisor has, you have too.

If buying a franchise is something you’re considering, don’t let illusions of granduer guide your way. It’s very important to remember that whilst the business model is setup to help people who don’t normally have the chance to get into business for themselves, actually get started, it’s not a cash stream from the start.

That’s why some more responsible franchisors actually guarantee their customers revenue for a period of time, maybe one or two years, that way it helps everyone get on their feet.

Without proper planning just like any business a franchise business can not be a success. Make sure you do your planning!

If you’re looking for the perfect franchise business for you and your family, look no further than JAN-PRO.

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