Entrepreneurship is growing more and more popular in the digital age. With do-it-yourself job opportunities in abundance and self-employment on the rise, striking out on your own is one way to get business done. Many potential entrepreneurs purchase franchises in order to begin their successful climb up the corporate ladder. However, there are some things you should know if considering the acquisition of a franchise. Compared to starting your own business from scratch, a franchise may be easier to get off the ground, but it has its own set of challenges and particulars. How long will it take you pay off your franchise investment? What rules must you comply with in order to stay within the bounds of your franchise agreement? What will you do if your franchise is not immediately financially successful? These are some of the questions that you will want to ask yourself before jumping in on a franchise deal.
The Basics of Franchising and Its Two Types
There are many advantages to launching a franchise, as opposed to beginning with a clean slate of your own independent business. Franchises have recognizable names and their branding is already existent. This is a huge draw for business owners, since franchises tend to come with their own built-in client base. It eliminates much of the risk factor and hard work that it takes to get a brand new business off the ground and acknowledged by consumers.
When you decide to purchase a franchise, you are essentially buying the rights to a name, brand and business strategy to use as your own. As a franchisee, you will be able to sell the products or services that are overseen by your franchisor. Many fast food restaurants, for example, are franchises. They are independently owned by location, but they all distribute roughly the same type of good with the same advertising and claims behind them.
There are basically two types of franchising options that you will want to be aware of if considering a franchise purchase. The first is more common and easily accomplished, while the second type is much more complex and involved.
Product or trade name franchising is the sale of a brand or trademark from a franchisor to a franchisee for their own use. Business format franchising, on the other hand, involves an ongoing relationship between the franchisor and the franchisee, in which the franchisor may pass on aspects of a business’s plan and techniques to the franchisee.
Things to Consider When Purchasing a Franchise
If you think you are ready to be the owner of a franchise, start by asking yourself any of the questions below. Since franchises can be such an expensive investment and can take years to pay off, it is far better to be prepared for the challenges ahead than to fail at the task of running your own franchise business.
By answering these questions, you will be able to assess whether it is the right time for you to purchase a franchise or not. Remember, franchises are a major commitment, in terms of finances, personal investment and time. Your business acumen will be put to the test, but you are likely to have great success if you know what you are getting yourself into beforehand and are fully prepared for the obstacles of being a franchise owner.
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