How to Start a Franchise Business


A franchise is a pre-packaged business that operates under con­tract with a parent organization. It is operated as though it were part of a large corporation, with standardized products, equip­ment, and methods of operation.

There are advantages to buying a franchise, particularly if it is a proven success. You are buying all the trial, error, and test­ing that have gone into making this franchise successful. You don’t require much previous business experience to own a fran­chise. Your parent company will (and should) provide you and your staff management assistance and business training. You also will be able to obtain credit more easily because of the strength of your parent company. Most of your supplies or merchandise will be available from a central source, and you will enjoy a recognized name, trademark, and national advertising program that will reduce your marketing expenses. The overall risk for failure will be minimal because of the parent company’s reputation.

But there are pitfalls in buying a franchise, and you must take steps to avoid them. First, find out how long the company has been in business. Look at its financial statements and its credit history. If you buy a franchise, make sure it is a growing com­pany, not a new one. Find out if any of the company’s franchises have gone bankrupt. If they have, find out why. Since you have to pay a franchise fee to the parent company, determine what this fee includes. Make sure that it includes a thorough educa­tion in the business, not just a name and brief training program. In addition, determine if the parent company charges an adver­tising fee. Request the cost of supplies (leased or bought) and rental fees. Determine if you or the parent company has exclu­sive rights to your territory and whether the parent company has the right to put another franchise in your area. Assess the amount of support the parent company will provide you. Be­cause such support is critical, talk to other franchise owners to determine if they have achieved their profit projections, how long it took them, and the hours they had to work to make their franchises successful. Finally, retain an attorney to read the franchise contract before you sign it. You want to be certain that the franchise is transferable, should you wish to sell it.

Whether you’re starting a business from scratch, buying an ex­isting business, or buying a franchise, information is the key to success. Many American businesses fail each year because own­ers don’t obtain enough information before getting started.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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