Recently-retired entrepreneurs in the United States may feel they’ve reached the end of the IRL working road, but owning a franchise is a great way to stay actively and engaged in the business world. But before jumping into the potentially lucrative world of franchising, there are many important questions that need answers. To shed some light on the world of franchising, the International Franchise Professionals Group (IFPG) has compiled this comprehensive list of frequently asked questions from our collective pilot group.
What is a Franchise?
At its core, a franchise is a license agreement between a franchisor and a franchisee. The franchisor is the business owner who owns the intellectual property (i.e. the name, logo, products, and services) and typically provides operating manuals, training, support, and various other resources to the franchisee. Meanwhile, the franchisee is the individual or entity that purchases the rights to operate a business under the franchisor’s brand name and guidance. It’s a mutually beneficial relationship because the franchisor gets to expand their brand name without doing the back-end work. The franchisee gets the opportunity to run their own business without starting from scratch.
What Are the Benefits of Franchising?
The main benefits of buying a franchise are saving time and money. As a franchisee, you can largely bypass the learning curve associated with building a business from the ground-up, as the franchisor (usually) provides support, resources, and training to get you up and running. Additionally, you get access to an existing customer base, established marketing plan (usually at a discounted rate), and sometimes even locations. Lastly, franchising typically requires a smaller investment than starting a business from the ground-up.
How Much Does it Cost to Buy a Franchise?
The cost of buying a franchise is largely dependent on the type and quality of franchise you are looking to acquire. In general, expect to spend around $20,000 to $50,000. The actual cost can range dramatically based on industry (e.g. food service vs. retail), geographical location, franchise structure, and more. And of course, all startups need capital—franchisees usually need to demonstrate financial stability that can cover the cost of the franchise fee, training fees, launch and ongoing operational expenses, premises, staff, and any other personnel or equipment required to run the business.
What Should an Aspiring Franchisee Look for in a Franchise?
First and foremost, focus on researching the franchise system and their franchisors. Familiarize yourself with the market demographics surrounding the franchise, the franchise’s services or products, their unique points of difference, the franchise’s operation and management structures, and more. Second, look at the terms and conditions of the franchise agreement and make sure you understand the requirements of the franchisor. Lastly, consider if the franchise is a good fit for you and family.
How Will Purchasing a Franchise Impact My Personal Life?
Purchasing a franchise can be a great opportunity for personal growth and fulfillment. However, owning a franchise isn’t for the faint-hearted—it takes hard work, dedication, and a tremendous amount of time and energy. Before buying a franchise, consider the implications that it will have on your family and personal life. Some potential issues can include being away from family for extended periods, forfeiting weekends that could be spent with family, and more.
What Support Do Franchisees Receive?
Whether you’re a first-time or a seasoned franchisee, it is important to look for a franchisor that offers support, resources, and hands-on guidance for every step of the process. Before buying a franchise, ask your potential franchisor what type of support they offer (e.g. training, marketing, account/budgeting advice) and if they offer ongoing operational and consultative support.
What Is the Best Way to Research Different Franchise Opportunities?
Researching different franchise opportunities can be done through a variety of methods including attending franchise expos, networking with current franchisees, asking a lot of questions, and leveraging all of the resources available online. Additionally, if you’re considering hiring a franchise consultant, make sure they have experience in the industry that you’re interested in.
Are There Any Other Resources I Should Read?
Yes! It is important to do your due diligence before jumping into the potentially lucrative world of franchising. Here are a couple of frequently-referenced industry resources:
The International Franchise Association (IFA) provides valuable information and resources for franchisees, including educational articles, events, market research, and more.
The Franchise Disclosure Document (FDD) is required by the Federal Trade Commission for any company that is selling franchises. The document includes key information about the franchisor/franchisee relationship, fees, business records, marketing policies, and much more.