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Want To Purchase A Franchise? Here Are 4 Important Factors To Consider
Truth be told, you can’t work for the rest of your life. While some companies these days are starting to be more flexible when it comes to their workers’ age limit, apparently, there are still other factors that might not allow you to work for as long as you live, like your health.
And because of that, many try to get into the business world. One of the good ways to do that is by purchasing a franchise.
Sure, it can be easy for some people to purchase a franchise and change careers. But, there are still some factors that you need to consider to ensure that you’re able to compete in the business world. And you need to be aware of that so you won’t regret your decision later. What are they, you say? Here are some of them.
Due Diligence
Because it’s easier to franchise than start a business on your own, some people think that it’s also easy to make a profit from the franchise. But, you shouldn’t depend on the profitability of the franchise alone.
Your job doesn’t stop after you’ve sealed a deal with your franchisor. Apparently, you still need to run it and don’t depend on the profitability of the brand alone.
Before you sign an agreement, evaluate it and yourself first. This is because the franchise’s profitability isn’t always guaranteed as not all of the franchises aren’t created equal.
You must do a lot of research and evaluation first before you make a decision. Check the franchisor first and see the latest franchise news here as much as you can. This way, you’ll always stay up to date and get to know more about the franchisor you’re eyeing. Remember, you’ll also be working with them, so it’s best to know them well and how they run the brand.
Aside from that, you need to take a closer look at the franchise system. Again, franchisors follow a certain system for their franchises and each of them has different terms and systems. Knowing how they work will help you ensure that you can make it grow and make a good profit from it.
Plus, see if the franchise is a good fit for you. Remember, not all of them are created equal. And you have to find the right one for you to make it work and achieve your goals.
Franchise Agreements
Purchasing a franchise is better than starting a business from scratch. This is because franchises have higher success rates compared to startups.
But, remember, franchising also means that you don’t have full control of the brand as they usually operate under a business model that’s predetermined. Therefore, when you purchase a franchise, you have to comply with the franchisor’s established system. So, the question you should ask yourself is if you agree with the franchisor’s system.
Don’t worry, some franchises are negotiable. But, before you make any deals, it’s important that you take a look and evaluate the terms and agreements of the franchisor you’re eyeing with your franchise lawyer.
One of the things you need to take a closer look at is the scope of your protected territory and what your franchisor can and can’t do with it. You should also ask about the accumulation of your royalty obligations’ grace periods and when they begin.
In addition to that, ask and negotiate about the liquidated damages, as well as limiting your liability in case you terminate your franchise agreement because of poor performance. You should also check your right to renew your franchise rights.
Also, inquire and negotiate about your right to transfer your franchise, especially to family members for real estate reasons or if anything unexpected happens to you.
On top of that, don’t forget about your rights of first refusal and rights to cure any defaults claimed by your franchisor.
Timing
Hate to break it to you, but just because a brand is successful and can franchise, doesn’t mean it should and you can franchise at any time. Purchasing a franchise means starting a new business. And running it also has risks involved.
Yes, it can be a great fit even for those who are going into retirement but is the timing right so you can find good staff members to take over most of the day-to-day operations? Is it the right time so you can focus on it?
Also, if you know when to start it, you should also know when to pull the trigger. If, for instance, you’ve found a brand that you love more and you have money for it; or if your franchise didn’t go well, what will you do?
Timing is everything when you’re running a business. And to know when to start or let go, it it’s important that you do your research and evaluate more on your franchise first. This is because your decision will depend on your situation – the interest rates for the year, the risks involved, etc.
Cost
Buying a franchise isn’t a joke as it involves a hefty amount of money you worked hard for. On top of that, there are also other costs that you need to think of, such as the rent for your space, your staff’s salary, and other bills. Hence, before you sign any deal, you should also factor in the costs of franchising.
One of the first questions to ask yourself is how much will it cost you to purchase a franchise. There are different franchises out there and each of them are priced differently, based on the brand. If you have the money for it, then, it’s worth considering.
But, don’t say yes yet as you also need to consider professional fees because, of course, you will need to consult a franchise lawyer and an accountant. Aside from that, you should also incur costs of the building of your office or store, inventory equipment, salary and benefits of your staff, etc.
Franchising is a good way to earn. But, make sure that it is right for you by considering different factors that could affect it over time.
