Retiring from a successful, long-term career is an exciting milestone. As you look towards the future, you might already have your eyes set on entrepreneurship. With an array of industries to choose from, buying into a franchise may be one of the best decisions you make. Before you take the leap, here are the frequently asked questions (FAQs) for those looking to become franchisees.
What is a franchise?
A franchise is a business model that involves an established brand or company (known as the franchisor) granting rights for a third-party (known as the franchisee) to use its business name, marks, processes, products, and services to open an independently owned business in a predetermined geographic area. Examples of these type of businesses include McDonald’s, Subway, and Dominos Pizza.
Is a franchise right for me?
Owning and operating a franchise can seem like a lucrative endeavor. Before you take the plunge, it’s important to weigh the pros and cons of franchise ownership to determine if it’s the right business venture for you.
The benefits of being a franchisor span the spectrum, from having an established business model, access to training and ongoing support from the franchisor, to the potential of having a proven track record of successes. Additionally, franchises also provide franchisees with a wide range of resources including advertising funds, purchasing benefits, and access to a respected brand.
On the flip side, there are also drawbacks of investing in a franchise. As a franchisee, you need to accept that you’ll pay royalties and fees, have tight, often inflexible systems and may need to stand out from the competition in an oversaturated market. You’ll also need to accept that you do not have complete control over the business model and will likely have to abide by a set of rules.
What qualifications should I have as a franchisee?
The majority of franchisors require the prospective franchisee to have:
– Management experience
– Demonstrate the ability to manage a business
– Provide financial information including an estimated investment
– Minimal start-up cost
– Proven ability to obtain funding
– Ability to manage a team of staff members
Having had a successful professional career is a great foundational building block. The combination of responsible financial management, team-building capabilities, and management experience should provide you with the confidence to make the move into franchising.
What financing options do I have as a franchisee?
Once you’ve decided to invest in a franchise, it’s natural to worry about financing. Before investing, it’s important to know your purchasing-power against the FDD and decide if you’ll need to find a passive or a traditional loan.
The International Franchise Professionals Group (IFPG) offers an array of financing options that may be available to you. Depending on the answers to your screening questions, you may qualify for one or more of the following options:
– Venture Capital
– Private Equity
– Debt Financing
– Small Business loans
– SBA Loans
– Equity and debt financing
Be sure to consult with a licensed commercial finance specialist that understands the franchise-investing landscape to determine which financing option is best for you.
How do I find the best franchise for me?
It can be hard to determine which franchise brand best suits your needs. To help you narrow down your choices, start by creating a profile of what your ideal franchise looks like. Identify your areas of interest, ideal demographic market, and your investor qualification needs. With the help of an experienced franchise broker, you’ll be able to determine which franchise best suits your skillset and fits your financial profile.