The world of franchising can be intimidating, particularly for those new to the business scene. If you’ve been considering investing in a franchise direct, you’ve likely got a lot of questions about how the process works. At the International Franchise Professionals Group (IFPG), we understand that purchasing a franchise can feel daunting and offers our expertise and guidance to help you navigate the waters. Here, we answer some of the most commonly asked questions about franchising and investing in a franchise direct.
What is franchising?
Franchising is an agreement between the owner of a business, known as the “franchisor,” and an investor, known as the “franchisee.” The franchisor gives the franchisee the right to open and operate a business based on the licensor’s existing business model, products, and services. The franchisee pays the franchisor to use the business model, and often also pays royalties and ongoing fees on a monthly or annual basis.
What are the advantages of investing in a franchise direct?
Investing in a franchise direct is a great way to get into entrepreneurship without having to start from ground zero. You’re able to benefit from the franchisor’s existing structure, products, and services so you can start turning a profit more quickly. Additionally, you’ll benefit from the franchisor’s brand recognition, market positioning, and training and marketing materials.
How can I evaluate potential franchise opportunities?
The first step is to find out as much as possible about the franchise you’re considering. Speak to other franchisees in the system, request the Franchise Disclosure Document (FDD), and meet with a qualified franchise consultant who can provide guidance and advice. Research the franchisor’s history, historical performance, ongoing support model, and other relevant factors.
How much will I need to invest?
The cost of investing in a franchise direct can vary greatly. Generally, you can expect to spend anywhere from a few thousand dollars to several hundred thousand. Generally, you’ll need enough capital to cover the cost of the franchise fee which is usually a one-time payment, as well as the initial start-up costs such as equipment and supplies.
What kind of support can I expect?
The level of support you can expect will vary greatly from one franchisor to the next. Generally, expect ongoing support in areas such as ongoing training, operational guidance, marketing and advertising, and product and/or service updates. Knowing what to expect in terms of ongoing support can be a make-or-break factor when it comes to your decision to invest in a franchise direct.
What happens if I need to end my franchise agreement?
If, for any reason, you decide to terminate your franchise agreement, it’s important to understand the implications before doing so. Many agreements contain a clause that states the franchisor has the right to terminate the agreement if certain conditions aren’t met.