What to Consider Before Buying a Franchise Business

There is much to consider when thinking about becoming a business owner. Am I cut out to be a business owner? How will I be able to sustain my current lifestyle while owning a business? Should I start my own business with an original idea, or should I purchase a franchise?  While one article can’t address every concern or questions, the goal of this article is to help you prepare for buying a franchise business.

Here are a few things to consider before buying a franchise business.

1.     Choose a Franchise Format

There are two basic kinds of franchise business operations. The most hands off format is product or trade name franchising, in which a franchisor sells the rights to a name or trademark to a franchisee. The second format is business format franchising. In this second form, the franchisor provides ongoing support and structure to a franchisee. This form may not allow as much freedom, but can offer an incredible amount of support and training, and even some limited forms of financial assistance.

2.     Do Your Homework

Do your homework. Make sure that the franchise business you are buying into will back you with their full support. If you choose to work under a business format, they should be present during every step of the journey, providing resources in training, construction as well as marketing. They should also already have a solid history of success and profitability.

A franchisor is required to give you a copy of their Uniform Franchise Offering Circular (UFOC) at least ten days before you pay any kind of deposit. Asking for any signatures or payment before this is supplied is a red flag. This document will provide key financial information, will detail any fees you are expected to pay, as well as any litigation or bankruptcy actions your franchisor may be involved in. Make sure to review your copy carefully.

3.     Talk to other franchise business owners

Before you make the decision to invest in your own franchise, speak to as many different franchise owners as you can. Make sure you seek out both owners of the particular franchise you are hoping to invest in as well as owners of franchises with similar business models. This will give you a well-rounded idea of what to expect when you invest, as well as an idea of what is offered by the competition. One of the major draws of owning a franchise is the support offered by the larger corporation. Understanding what is commonly included in this deal will help you evaluate the value of your offer.

It is particularly important to seek out other franchise business owners within the same franchise model. Go visit in person, invest in a few plane tickets if you must, it is worth it. Regardless of their spotless record or financial success, all franchise based companies have pros and cons unique to them. You are much more likely to get an accurate picture of their strengths and weaknesses when speaking with a peer investor, someone who has quite literally walked the same path ahead of you.

Not only will this help you make the most informed decision possible, it will also provide you with valuable connections within the industry if you do decide to invest.

For more help establishing your Franchise Business, contact Source Commercial Funding today at 202-499-4441.




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