When you purchase a franchise, you also have the right to use the franchisor’s name for a limited time along with their products and services. It is often beneficial to start out with an established name than starting out from scratch. There is less advertising and promotion expense.
Before you select a franchise system or invest your money into a particular system, it is very important that you know yourself, desires, abilities and goals. If you are not happy after investing so much time or money, the odds are against you that you will be successful because you heart will never be in it.
Be brutally honest and ask yourself the following: do you need a specific annual income, are you interested in sales or services, how many hours are you willing to work, do you want to operate the business or hire a manager, do you want enployees or desire to work alone and is this the first of many outlets?
Often you must pay royalties based on a percentage of your weekly or monthly gross income. Franchise agreements may run for as long as twenty years and the franchisor may decline to renew if he chooses. Or, you can lose the right to your franchise if you breach your contract.
An accountant can help you understand the company’s financial statements and a lawyer can help you understand your many obligations ahead (which will be many and necessary) under the franchise contract. They will help you review the franchisor’s financial statements, audit report and other important company statements.
The more information you have will help to ensure that you obtain the full picture before you invest. Ask questions about: hidden or unexpected costs, training offered, expected time to earn reasonable income, contractual obligations, and would they recommend doing it again?
Within the franchisor’s disclosure document, many important items have to be disclosed and they are: the franchisor’s background, the business background, if there has been any bankruptcy, and all litigation history. This must be given to you fourteen days before you sign any papers.
You should rely on your own lawyer or accountant for all recommendations, not the franchisor’s recommendations. If any problem arises after a signed contract, it may be very expensive to repair. A franchise lawyer can help you understand your obligations before hand and it is worth the fee.
Author: Myles KruegerThis author has published 25 articles so far.