Why Should I Buy a Franchise?
Unlike independent businesses, most franchises offer training and support from the corporate office, along with a proven business system, and a product or service that has already been accepted by the general public and in-demand.
Questions to Ask Yourself as You Consider Buying a Franchise
Just like any other investment, buying a franchise has risks. Here are some important questions to ask yourself when exploring franchise opportunities:
- How well does the company's business model complement your personality, background, interests and career plans?
- What is the demand for the company's products or services?
- Who is their competition?
- What is the franchisor's background?
- What level of support will you receive?
What Are the Benefits and Responsibilities of Franchise Ownership?
Benefits
Easy access to a recognized product and a proven method of operating a business reduces the risk of opening a business.
Statistics from both the Small Business Administration and Department of Commerce show a drastically lower rate of failure for franchised businesses than for other business start-ups.
Franchisees purchase not only the right to use the company's trademark, but also the experience and expertise of the franchisor's organization.
Buying a franchise enables you to operate a business. The franchise fee that you pay to the franchisor allows you the right to use the franchisor's name for a limited time. It also entitles you to receive assistance such as finding a location for your store, initial training and an Operations Manual, together with advice on management, marketing and personnel issues. Some franchisors offer ongoing support, which can include regular newsletters, training updates and sometimes a phone number for technical assistance.
Responsibilities
Buying a franchise does not guarantee business success. If you are not prepared to dedicate the time, energy and financial resources that are necessary to run a business, then you may need to reconsider your decision.
When buying a franchise, bear in mind that you will be required and expected to follow the system that was developed by the franchisor. If you are unwilling, incapable or too independent to follow this program, then you may not be a good candidate to become a franchisee.
Advantages of Buying a Franchise
Starting a franchise is a lot like cloning a successful business and opening it in your own territory. The only real differences include the motivation and talent of the new owner (YOU) and the opportunity presented by the location in which you decide to open the business.
Some of the most important advantages of owning a franchise include:
- Training - Nearly all franchise companies provide you with all the training you need to become successful. After all, they have a vested interest in you being able to run the franchise profitably and really want to see you succeed!
- Brand Awareness - It can take years for a business to successfully build a well recognized brand that helps drive sales and provides a competitive advantage over smaller competitors. Brand awareness can make or break a business. Consumers buy things that they are familiar with and work with companies they know and trust.
- Purchasing Power - Most franchise companies have the opportunity to purchase all their goods, products, and supplies at reduced rates because they buy in bulk. Right away these savings can be passed back to each franchise unit and provide a competitive advantage in the marketplace.
- Proven Business Plan - Running a successful business is similar to learning a math formula and following its rules and laws time and time again. Through years of experience franchise companies know what works and will teach you their formula for success.
- Speed Up the Process - In addition to an established brand, most franchise companies support their franchisees with both local and national advertising and promotions to help drive sales.
- Support - Successful franchise companies provide ongoing support for their franchises and franchisees. This usually includes ongoing training, system upgrades, product enhancements, as well as question and answer support systems using dedicated representatives within the organization.
What Can a Franchise Do for Me that I Can't Do for Myself?
A franchise is already a functioning business system. While entrepreneurs must utilize thousands, millions or even billions of dollars in order to set up a profitable business model, a franchisee can step into an already established concept, with much less risk for failure involved. For example, are you aware that as many as 50% of new business start-ups fail each year? An already functioning business model will put you heads and shoulders above the novice entrepreneur who not only needs to generate profits, but also needs to develop a profitable business model. For instance, fast food businesses greatly benefit from their association with the brand name and products of the franchisor. That might not hold true however, for a car wash.
How can I Evaluate My Potential to Become a Successful Franchisee?
One of the most important aspects in evaluating a franchise opportunity is the match with your own skills, abilities and experience. Most franchisors say the ideal franchisee is an outgoing person who is eager to succeed, but not so independent that he or she resents other people's advice. You must be able to balance your entrepreneurial initiative with a willingness to comply with the business formulas used by the franchiser. Remember, a successful partnership between a franchisee and franchiser involves a mutual understanding of each other's values and achievements.
Determine exactly what you want out of life and what you are willing to sacrifice to achieve your goals. Be honest, rigorous and specific.
Ask yourself how this decision will affect your family. Do they understand the risks and sacrifices required, and will they support your efforts? Beginning a franchise business is a major decision that does not ensure easy success. However, an informed commitment of time, energy and money by you and your family can lead to an exciting and profitable venture.
Franchisors are seeking individuals with the ability to soak up their knowledge and systems, and develop a successful business through a mixture of hard work and the proper implementation of their business concept. Here are the factors that will affect whether you are suited to owning a franchise.
How Do I Choose the Right Franchise?
Deciding which franchise is right for you is a huge decision. Besides your personal background and style, the right business should not only interest you, but the initial investment amount must fit into your budget and it should enable you to live the lifestyle you desire (do you want more free time, more money, control over your work environment?). Additionally, any business you choose to buy must meet a market demand in your community. If there is no market demand or the area is already saturated with similar businesses, your new business will not have a bright, long future ahead of it. The best advice is to do your research before signing a franchise agreement. Speak with current and past franchise owners and make sure there is in fact a demand for the business in the area you'd like to open the business.
Many franchisors operate well-established companies with years of experience both in selling goods or services and in managing a franchise system. Some franchisors started by operating their own business. There is no guarantee, however, that a successful entrepreneur can successfully manage a franchise system.
Carefully consider how long the franchisor has managed a franchise system. Do you feel comfortable with the franchisor's expertise? If franchisors have little experience in managing a chain of franchises, their promises of guidance, training, and other support may be unreliable.
A growing franchise system increases the franchisor's name recognition and may enable you to attract customers. Growth alone does not ensure successful franchisees; a company that grows too quickly may not be able to support its franchisees with all the promised support services. Make sure the franchisor has sufficient financial assets and staff to support the franchisees.
What are the Fees Franchisors may Charge?
There are three fees usually associated with Franchising:
- Initial Franchise Fee - a one-time fee you are charged to become a franchisee.
- Royalty Fee - a weekly continuing fee that may range from
5% to 10% of gross sales. - Advertising Fee a continuing fee charge by many franchisors that may range from 2% to 7%.
Do Franchisors Help with Financing?
Most franchise companies have the resources to help a qualified buyer procure a loan for the purchase of their business through a third party.
How Many Kinds of Businesses are Franchised?
There are over 80 industries that lend themselves to franchising.
How do I Find the Best Franchise for Me?
Orion goes to great lengths to fit a prospective buyer to the franchise for which they are most suited. The first step in this process is completing the Information Request Form and submitting it to Orion. CLICK HERE to submit your request.
What's Next After I Submit the Form?
Orion will review the form and contact you to set up a no obligation meeting for you to learn more about Orion's services and Franchising in general.
What are Orion's Charges for this Service?
There is no charge to our clients in the buying of a franchise. Orion is compensated by the Franchisor upon the completion of a sale.
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