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Buying a Franchise. A Step By Step Guide

Dec 5, 2007
You've started your business and have had some success. You decided, after some deliberation, that you would like to expand your business. However, you don't want to branch out your current operations, and you don't want to go through the hassles of starting up another business venture. What can you do to satisfy your needs of expansion without adding that extra level of unnecessary stress? Buying into a franchise operation may be the perfect choice for you.

What is a franchise, and is it or me?

A franchise is an existing business that has already been tried and tested through an already developed business model. It is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business.

Generally, a franchisee sells goods or services supplied by the franchisor, or that meet the franchisor's quality standards. The franchisor will usually assist in setting guidelines of the purchase of inventory and provide marketing and advertising programs.

One of the most compelling reasons people opt to start a franchise, as opposed to starting a new small business from scratch, is that in a franchise operation, the franchisor provides valuable business expertise including:

Marketing and advertising plans - tried and true branding and marketing material.

Management guidance - providing you with a business model that has been previously successful.

Site location - Finding a location for your outlet.

Administrative support and training - Providing training manuals for future use and workshops for new and existing employees.

These things would not otherwise be 'readily' available to businesses starting from scratch.

Things to consider before you start

Before you purchase a franchise, there are some things that you should examine. For instance, determine your initial costs. Franchises, because of their turnkey nature, tend to cost more money to get into.

They could require expenses such as grand opening fees, and there are ongoing royalty fees in the form of sales percentages that are required to be paid regardless of how much profit you're bringing in. Because franchises usually share in advertising costs, you are also required to pay into an advertising fund.

Franchisors reserve the right of sight approval, signage and employee uniform. This control extends to suppliers and products, as it is their name that you are leasing, and they wish to maintain continuity and brand recognition. They may also limit the area that you can service in order to allow them to facilitate another franchise starting.

Contract length and termination is also something to be considered. A franchisor has the right to terminate if they feel that you are not living up to the terms of your contract. They also reserve the right to decide whether to renew the contract. According to the FCC, franchise contracts usually last between 15 to 20 years, but there are no guarantees that you will be able to renew your contract at the end of the term.

Weighing the options

With the high initial costs, you may not want to damage your present business cash flow to service the potential franchisor. Many small business owners, whether they own a franchise already or are stepping into a new one, have discovered the concept of a business cash advance available from FastUpFront: Business Cash Advance provider. This method of capital acquisition comes without the need of repayment and is interest free. It is hassle-free and provides quick access to the funds needed to kick-start your new business venture.
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