Multi-Unit Franchise Experts

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Owning a Franchise: an Investor’s Perspective

As a recently retired executive with an impressive career, you’re looking to stay engaged and active through business. Franchising makes a great choice, especially because franchising offers the freedom of business ownership combined with the support of an existing network.

The International Franchise Professionals Group (IFPG) is made up of 1,300 members who guide aspiring entrepreneurs in investigating and investing in franchise businesses. Our commitment to ethics, collaboration, and integrity ensures potential franchising owners get the best possible advice and support.

To get you started, here are some answers to frequently asked questions about becoming a franchise owner.

What is Franchising?

At its core, franchising is a business model in which a larger company, referred to as the franchisor, grants business owners, referred to as franchisees, the right to use their brand name, sell their products or services, and employ their operating systems. Additionally, in exchange for fees and a percentage of gross sales, the franchisor will support the franchisee in all areas, including accounting, distribution, training, and advertising. Franchising models can range from single-unit businesses such as restaurants or household services to national networks of dozens or even hundreds of franchisees, such as large retail stores.

What are the Benefits of Franchising?

Franchising offers several major benefits to franchisees. Firstly, franchisees get a high level of support from the franchisor, including access to their established customer base, operational models, marketing strategies, and comprehensive training.

Additionally, the franchisor has already done the hard work of developing and testing the business concept, which means less risk for the potential franchisee. Furthermore, franchisees benefit from the franchisor’s buying power, allowing them to purchase goods and services at lower rates. Finally, the brand recognition associated with many franchises, particularly established franchises, can provide the needed visibility to attract customers and increase sales.

How Much Does it Cost to Become a Franchisee?

Franchise fees and related costs vary greatly from franchise to franchise, so it’s important to research your options and understand the costs associated with each franchise. Generally, franchise fees can range from approximately $20,000 to upward of half a million dollars, depending on the size of the franchise.

Most franchisors also charge a percentage of the franchisees’ gross sales as an additional fee, usually between 4 and 6 percent. Some franchisors also require franchisees to purchase equipment and supplies from the franchisor or from approved vendors.

What are the Legal Requirements for a Franchise?

Franchising is regulated by the Federal Trade Commission (FTC) and requires franchisors to disclose certain information to potential franchisees, including details about the franchise agreement, the initial investment necessary, estimated costs, and potential risk factors.

If the franchisor is operating in multiple states simultaneously, then the franchisor is also required to register their franchise with each state’s Department of Commerce. It’s important to keep in mind that laws governing franchising vary greatly from state to state, and it’s up to the franchisee and their advisors to research the applicable laws in their state.

What Qualities Should I Look for in a Franchise?

When researching potential franchises, it’s important to assess the franchisor and the franchise to make sure they are a good fit for you. Here are a few key factors to consider:

• Reputation: Research the reputation of the franchisor, both among their existing franchisees and outside sources, to ensure they are a reliable business partner.

• Support: Understand the level of support the franchisor offers, from initial training to ongoing operations, to make sure you are set up for success.

• Timeline: Determine how long the franchisor has been in business and their plan for future expansion, as these are indicative of their level of success.

• Requirements: Review the financial requirements, such as franchise costs, to make sure they are within your budget.

Taking the time to research the franchisor and the franchise can save you from costly and avoidable mistakes.

What is the Process for Investing in a Franchise?

Once you’ve identified a potential franchise, the process of investing is relatively straightforward. You’ll first need to fill out and submit a Franchise Disclosure Document (FDD), which is a comprehensive legal document that outlines all of the risks and benefits of investing in the franchise.

After you receive and review the FDD, you’ll have to enter into a franchise agreement with the franchisor, which outlines the terms of your agreement. You’ll also have to pay the franchise fee, receive training, and comply with all of the franchisor’s criteria.

How do I Find the Right Franchise for Me?

Figuring out the best franchise for you is a highly personal decision. Consider what you are passionate about and what you can bring to the table, then research franchise opportunities that match your expertise. A trusted franchise consultant can also provide advice and help you navigate the franchising process.

Topics:

Franchise,

Investing,

Franchising Model

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