Multi-Unit Franchise Experts

Franchise professionals reviewing how to get started on their franchising journey

Franchising for Investor

When investors consider purchasing a franchise, they are often inundated with questions about what their due diligence process should entail, what to look for, and what potential pitfalls to avoid. The International Franchise Professionals Group (IFPG) provides industry specific answers and insights to many frequently asked questions. Whether a franchise investor is looking to open their first business or to expand an existing franchise network, we’re here to help them make an informed decision. We assist 10-year outs and long-term retirement investors to consider the long-term sustainability and growth potential of their investment.

Here, we’re going to answer some of the most common questions about franchising so that investors can understand the different facets of the decision-making process. From understanding what franchisors and franchisees are responsible for to how to evaluate business performance and potential risks associated with different markets, we provide investors with the insights and information they need to make sound decisions and achieve long-term success.

What is Franchising?

Franchising is a business arrangement in which an individual, company, or organization (the franchisor) provides a brand, trademark, or product to a group of people or businesses (the franchisees) who can then use that product or service to make money. The franchisor owns the brand, and the franchisee owns and operates the product or service in their own business. Franchises can be either exclusive or non-exclusive. Exclusive franchises are essentially exclusive agreements between the franchisor and franchisee that can last anywhere from five to fifteen years. Non-exclusive franchises, on the other hand, are open to multiple parties and are not limited to a single franchisee.

What Benefits do Franchisees Receive?

Franchisees benefit from a number of advantages when they partner with a franchisor. For starters, franchisees usually have access to a larger customer base, greater brand recognition, and greater buying power. As a result, they are able to offer more competitive prices for their products and services. In addition, franchisees benefit from the franchisor’s existing marketing programs which can save them a great deal of money and time. Finally, franchisees have access to support and guidance from the franchisor which helps them to navigate the business world and capitalize on opportunities.

What is the Difference Between Franchisors and Franchisees?

The primary difference between franchisors and franchisees is the amount of control and responsibility each party has when it comes to decision-making. Franchisors have overall control of the business and are responsible for setting the prices, policies, procedures, and contractual agreements. Franchisees, on the other hand, are responsible for the day-to-day operations of the business and are typically free to make decisions about their product offering, marketing, and staffing.

How is the Franchise System Structured?

The franchise system is typically organized in two tiers. The first tier involves the franchisor who sets the rules, regulations, and terms of the contract. The second tier involves the franchisees who are responsible for operating the business according to the terms of the agreement. Franchisees can be an individual or a group of individuals, typically with some level of experience in the industry, who are able to secure financing and agree to abide by the franchisor’s terms and conditions.

What Are the Common Risks Associated with Franchising?

Franchising can be a rewarding but also a risky endeavor. Some of the most common risks associated with franchising include poor market conditions, costly legal disputes, a lack of financing, incorrect pricing structures, and excessive competition. Other risks include a lack of control over business operations, inadequate customer service, product quality issues, and inadequate franchisor support.

How Can Franchisees Evaluate Potential Opportunities?

When evaluating potential franchise opportunities, investors should thoroughly research the potential risks and rewards of the structure. They should also review the financial data, customer ratings, and customer feedback of each opportunity to determine how likely they are to succeed. Investors should also consider the potential growth opportunities of the business, identify any potential areas of improvement, and be aware of any competitors who could potentially impact the success of the business. Finally, investors should make sure to research the franchisor and make sure that the legal agreements are fair and beneficial to all parties involved.





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