Franchising refers to the methods of practicing and using a specific business philosophy or system. The Franchisor, or Home Office, grants the franchise operator, the franchisee, the right to distribute its products, services, techniques, and trademarks for a percentage of sales, commonly called a royalty fee.
Various services are provided by the franchisor, such as: advertising, training, startup assistance and other ongoing support. A Franchise License is awarded by the franchisor to the franchisee. This written agreement forms the foundation for the relationship between the 2 parties and clearly outlines their responsibilities to each other. The Franchise License usually lasts between 5 & 25 years.
In the past 5 to 6 years we have seen a growth in a segment of the Franchise industry that relates to Service & Home Based Franchises. These franchises are generally home based, owner/operator and lower cost due to lower overheads.
What is the best Franchise?
As a Franchise Consultant I get asked this question on a daily basis. I work with clients to help them find the right franchise and through those conversations they almost always as me: “What is the Best Franchise?”. There is no single answer for this question as the answer truly depends on the criteria you set as a perspective franchise owner. Meaning, maybe you want a retail location with 5 employees that makes $50k/yr, or maybe you want a home based business that has zero employees and makes $50k/yr. Either way, the word “best” becomes relative to what is important to you.
I realized quite some time ago that I could never “sell” a franchise to anyone, the only way someone will buy a franchise is if it makes sense for them & their family. Performing the proper due diligence is key to finding the best franchise for you.
How much does a Franchise Cost?
The cost of a Franchise will usually vary between $5k & $100k. The total cost varies from system to system. Some common factors that influence the startup costs are:
– Age of the franchise – Number of franchises – Responsibilities of each party – Name brand recognition – The service – The product – Length of term – Many other factors
The startup cost of a home based or owner/operator Franchise is usually significantly lower than starting almost any other form of Franchise due to reduced overhead, reduced inventory requirements, no office space or retail space etc… To view the cost of different Franchises, you can visit this site: OpenAFranchise.com/cost
Why buy a Franchise?
Most people purchase a Franchise for one of two reasons.
#1. Reduce their risk. Quicker startup times, faster break even points & ongoing help after startup. All of these things help reduce the risk of starting a business.
#2. They don’t want to create a system, they want to use someone else’s program, not reinvent the wheel.
How much can I make with a Web Based Franchise?
Another one of the many questions I get asked on a regular basis is: “How Much Can I Make?”. This is an important question regardless of the type of Franchise you are exploring. The simple answer is: I can’t tell you.
Franchising is regulated by the FTC. The FTC does not allow a Franchise Company or Franchise Consultant to make an earnings claim unless those earnings are published in the Franchise Disclosure Documents or FDD. If the Franchisor publishes any numbers in the FDD then they are permitted to discuss them with a perspective Franchisee. If they don’t publish them, they nor we are permitted to discuss them with a potential franchise owner.
If you made a decision based on earnings information that the franchise company provides to you and they don’t publish that information in their FDD documents, the Franchisor may be liable for future lawsuits regarding your success or failure.
That being said, this is still a very important question. The real answer is: No one can tell you how much YOU are going to make, because the biggest determining factor in that equation is YOU. However, you are able to get a feel for what the potential of a particular franchise might be by talking to existing franchise owners that already own that same franchise in another area. This is part of the due diligence process.
What should I look for in a Franchise?
When researching any Franchise, you should look for some key factors. This list is by no means an exhaustive list, there are many more things you could look for too, depending on what is important to you.
– How long have they been in business? – How many franchises do they have? – How many franchises have failed? And why? – Do they make an earnings claim in their FDD? – What are my responsibilities as a franchise owner? – What are the franchisor’s responsibilities? – Where is the industry now? Where was it 5 yrs ago? Where will it be in 5 yrs? – How many home office employees are there? – Is the franchise organization expanding, stagnant or shrinking? – Do I get a protected territory or name brand to use? – How often do you hold training & where is it held? – What are the average gross revenues per unit nationwide? – Did they start as a Franchise or as a business and expand through franchising?
These are just a few of the questions to talk about when researching a Web Based Franchise. Here is a free ebook on franchising, A Consumer Guide to Buying A Franchise you can download it for free here: EbookOnFranchising.com
As you start your entrepreneurial search for a franchise, make sure to perform the proper due diligence, talk to existing franchise owners, visit the home office, talk to a lawyer, and work with an experienced franchise consultant. A franchise consultant can help you find the right franchise by making sure you get the information you need on each franchise.
Good luck in your business venture!
About the Author
John Henning is a Franchise Consultant with over 5 years experience in Franchising & Business Development. Our Franchise Showroom is located in a suburb of Philadelphia. http://OpenAFranchise.com
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