Multi-Unit Franchise Experts

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FAQs: Make a Profitable Transition to Franchise Ownership

If you’re feeling stuck in your corporate career, transitioning to business ownership through franchising can be an attractive option. The International Franchise Professionals Group (IFPG) is a membership-based franchise consulting network, one that can guide aspiring business owners through the process of identifying and investing in franchise opportunities. As you explore the upsides of franchising, you may have questions. Here, we’ve created a guide to answer some of the most common questions about profitable franchise ownership.

What is a Franchise?

A franchise is an agreement between an individual or group (the franchisee) and a seller of a product, packaged service, or another type of business concept (the franchisor). The franchisor grants a license to the franchisee to use their name, business methods, and/or delivery system in exchange for an upfront fee and recurring royalty payments. The relationship also includes a set of operating procedures, controls, and training that the franchisee must abide by in order to maintain the integrity of the franchise system.

What Are the Benefits of Owning a Franchise?

There are several benefits to owning and operating a profitable franchise:

• Franchisees receive pre-existing customers when they sign up with a franchisor – customers who may already have a loyal relationship with the brand and its products.

• Franchisees receive business assistance from their franchisor, such as in-depth training, marketing plans, operational support, and more.

• By setting up a franchise in an area with an existing customer demand, the franchisee can quickly build capital and start to turn a profit, which can take years for a startup business from nothing building a brand.

• With most franchise agreements, the franchisor assumes the risk of up-front costs, as well as any litigation problems that can arise through the use of trademarks, operating procedures, or any other licensing agreements.

• Franchisees benefit from the marketing campaigns of the franchisor, as well as control over their own business decisions.

What Are the Steps to Buying a Franchise?

Taking the steps to become a franchise owner depends on the specific franchisor and/or franchisee. Most franchise agreements start with a meeting between the franchisor and potential franchisees to discuss the franchise’s services and trading structures, as well as determine whether the franchise and franchisee are a suitable fit.

From there, the process usually follows these steps:

• Research. The investigating the franchise opportunity and researching different franchisees.

• Financial review. Examine the financial potential of the franchise and compare it to similar opportunities. Discuss potential royalty payments, costs, and other investments with the franchisor.

• Negotiations. Reach an agreement with the franchisor on the terms of the license, such as initial payment, fees, and more.

• Legal review. Have an attorney review the agreement and any accompanying contracts.

• Signing. Once all of the paperwork is completed and approved, sign the agreement and begin the process of setting up the franchise.

What Are the Different Types of Franchising?

The types of franchising depend on the type of business. For example, the restaurant industry offers quick-service franchises like McDonald’s and full-service franchises such as Chili’s. The three most common types of franchises are:

• Single-Unit Franchises. This type of franchise is owned and operated by one person or entity.

• Multi-Unit Franchises. Multi-unit franchises are owned and operated by one person or entity, but they may include multiple locations.

• Regional Franchises. Regional franchises are large-scale operations that span multiple states, or even countries.

What Are the Financial Requirements for Owning & Operating a Franchise?

The financial requirements vary depending on the type of franchise and the specific regulations surrounding its agreement. Typically, the financial requirements include:

• Upfront investment. This will usually include an initial franchise fee, which usually ranges between $5,000 and $30,000.

• Ongoing fees. Most franchise agreements include ongoing fees of between 4 and 6 percent of the franchise’s total gross sales, as well as payments for advertising, legal, and other expenses.

• Working capital. Depending on the franchise, working capital can range from a few thousand dollars to hundreds of thousands, and is used to cover the operating costs of the business until it begins to turn a profit.

• Miscellaneous costs. Depending on the franchise, additional costs may include technology and equipment, wages for employees, permit and license costs, and insurance.

What Are the Benefits of Working with an IFPG Professional?

The IFPG is a membership-based franchise consulting network of franchisors, franchise consultants, and vendor members. Our purpose-driven mission is founded on collaboration, ethics, and integrity.

When you work with an IFPG Professional, you’ll benefit from:

• A team of experts who leverage deep industry connections

• Comprehensive action plans to exceed your goals

• Confidence throughout the entire process

• Ongoing support long after the sale

• Unique resources and opportunities

Not only does IFPG ensure that you connect with trustworthy, legitimate franchise opportunities, but our job is to help you make a more profitable transition into franchising.

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Topics: Profitable Franchises, Franchise Ownership, Franchise Benefits

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