Business Franchise

You can't wait any longer to fire your boss?  Are you in hurry to be your own boss?  Instead of starting from scratch, you can always take the short cut of buying a franchise. 

Franchising is an arrangement whereby one party (the franchiser), which has established a proven way of running and managing a business, licenses another party (the franchisee) and gives him the rights to operate in the same business format, trade, service mark or trade names.  The business arrangement involves a legal contract between the two parties.  There are three components of a franchise:

- A stipulated way of operating the business

- A distinctive trade or service mark

- Fees - joining, on going and royalty

Franchising has many advantages.  In addition to giving you a faster and easier entry into business, you also can enjoy:

- The security and experience that the franchiser and franchises within the system offer

- The benefits of an established trade or service mark

- The benefits of a tested operating system

- The benefits of joint advertising and promotion

- The support of the franchisor (training, management, business plan, research and development, etc) - Reduced purchasing costs

- Less hassle in preparing a business plan

- You become part of a franchisees network and you're all working as a team toward the same goal. 

The advantages of franchising must come with a price, which is an initial franchise fee.  This fee is usually payable up front to the franchiser.  It also involves the periodic payment of royalty, management fees or renewal fees as well. 

As a franchise business you have to operate strictly in accordance with laid down procedures and premises that must be in a specific design, thus the franchisee often has little control over his own business and how much starting capital he needs to come up with.  The figure will be determined by the franchiser who will also be supplying the equipment, systems and arranging for the design and renovation of the premises. 

Beware of franchisers who are more interested to make quick money from the sale of franchises than in growing their businesses.  They just have to develop a so-so business concept, prepare a fair business plan, start an outlet and get some publicity. 

Here are few questions you should ask yourself before buying a franchise:

You make great burger: do you really need to pay Burger King $100,000 to use the name 'Burger King'? 

Flexibility of operations: when you operate under a franchise, you have to do it exactly the franchiser's way.  You won't be able to implement your own ideas or sell other products. 

Franchiser: is it well known or reputable?  What about its track record?  Who are the people behind the business?   

Franchise or business: is the business really practical?  What support, business plan or back up services can you expect from the franchiser?  Is it only interested in making money up front from the sale of franchises?  What are the overall costs involved?   

Franchise territory: how many other similar franchisees are within your area?  This could be a competitive nightmare, which might ultimately force you to close your doors. 

International or domestic: if the franchisor's headquarters is in foreign country, will it be any problem if you require assistance or need to speak to a company representative in person? 

Franchise agreement: study it carefully, check if all the terms are clearly stated and seek legal advice if you're in doubt.