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Should I buy a franchise? What to consider

If you’re thinking about buying a franchise, it’s important to understand the franchise system and then decide whether you will be happy operating a business within that system. This is by no means a complete list, but here are some important things to consider.

Buying a franchise means you are buying a proven system. You will be legally bound to operate within that system by following their rules and you will be giving up control of many aspects of the business operations.

Buying a proven system is one of the biggest benefits of joining a franchise system, but it requires you to carefully consider your personality and leadership style. The franchise system is best suited to individuals with specific traits such as working well in groups, rule followers, non-innovative etc.

It is not generally suited for individuals who are creative, like to be in complete control or are not team players. Make a list of job related things that you enjoy doing and a list of those that you do not. s your list consistent with the duties you will have to perform as a franchise owner?

Buying a franchise is like owning any other small business, and it does not guarantee success. You will likely invest a considerable amount of money and you will probably work harder and longer hours than ever before.

Look at the franchise mission statement and culture. Does this align with your values and goals? Take a hard look at the time you will invest by owning the franchise. As the owner, you need to be prepared to work every hour that the business is open for operation.

Think about your family and personal situation. Are you willing to sacrifice time with them to work nights and weekends? Will they be involved in the business? Can you afford to have no or little income while you are building the business? What is your exit plan? How long do you plan to own the business? Will you sell it or are you building a family legacy?

Thoroughly investigate the franchise. Talk to current and past franchisees. Visit an operating franchise multiple times at different times of operation. Use your friend Google and the Internet to see what owners, customers and the press are saying about the franchise.

Take a look at www.unhappyfranchisee.com. Hopefully you will not see the franchise you are considering on this site. A certain number of people always are unhappy with something, but if you see overwhelming negative comments or reports, take caution.

Also look at www.sba.gov. They have a list of approved franchises as well as list of franchises that may be ineligible for SBA funding due to agreement issues.

Accept the fact you may get vague information from the franchisor during the initial contact(s). This is a good thing as it indicates the franchisor is protective of their brand and not willing to give extensive information to anyone who just inquires about the franchise.

You may have to submit a franchise application to get the answers you are really looking for. After that, the interview process can begin. You get to interview them and they get to interview you.

If you feel that they are really scrutinizing you or making you jump through a lot of hoops, consider that a good thing. Once again, this indicates they are protective of their brand and will put other potential franchisees through the same process.

You need to carefully review two legal documents, and I suggest you do this with an attorney who has franchise or extensive business expertise.

The UFOC is the Uniform Franchise Offering Circular, and it provides detailed information on the franchise background, fees and investment costs, obligations, bankruptcy and litigation filings, restrictions on services or products, territory, trademarks and more.

This is not something you negotiate. It just provides information and should not be the only thing you consider when evaluating the franchise.

The second document is the franchise agreement. This is the document that is legally binding between you and the franchisor. It is the document that in theory can be negotiated but don’t expect much. There may be minor items such as transfer fees or expanded/protected territories but franchisors know the importance of protecting the brand and the system and will usually insist on uniformity.

If you have been told something and it is not in this agreement, it is not true.

I have owned franchise and independent businesses and there are pros and cons to both. There are many more things to be discussed, questioned and reviewed; so if you are thinking about buying a franchise business or are in the process of doing so, please contact me for a free, one-on-one and confidential consultation.

 

Becky Brownlee is a business consultant with The University of Georgia and Georgia Southern Small Business Development Centers and can be reached at rbrownlee@georgiasbdc.org.

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