Are you recently retired from a successful career and wishing to stay active and engaged in a business venture? Owning and operating a franchise is a viable option that can provide you with a new purpose-driven mission and ensure your legacy continues after you retire from your previous career. To ensure that the franchise business you purchase is right for you, the International Franchise Professionals Group (IFPG) has compiled a list of the most common questions that franchisees have asked when considering investing in a franchise opportunity.
What is a franchise?
A franchise is a business model in which the owner of an established brand or product name grants another business permission to use their trademark in exchange for a fixed fee and a percentage of revenue. The people who own the franchise are known as ‘franchisees’. The franchisor is the company who grants permission to use their business model, trademark or brand name, and in return receives payment from the franchisee in the form of royalties and fees.
What are the benefits of buying a franchise?
Buying a franchise allows you to become your own boss while still enjoying the security and reputation of an established brand. Franchises can provide low start-up costs, as compared to starting up your own business, and a built-in customer base. You can also expect to benefit from ongoing support from the franchisor, such as training, operational advice, marketing materials, and even financial assistance.
What is the risk of franchise ownership?
As with any business venture, there is the potential for risks associated with investing in a franchise. Before making any major decisions, you should research the financial and operational history of the franchisor, as well as those of any franchises that have been bought and sold in the past. It is essential that you thoroughly research the franchise before signing on, in order to understand the risks and potential pitfalls of owning the franchise.
How do I choose the right franchise?
The first step in selecting the right franchise is determining your interest in the business sector. Research the industry and your potential customer base and be sure that you are passionate about the business you are entering into. It is also important to consider the financial return you can expect from the franchisor, as well as the amount of investment you will need to make. Be sure to calculate the start-up cost, ongoing operational expenses, franchise fees and royalties, and potential capital expenses.
Once you have identified the franchise industry you are interested in, you should research the various franchise opportunities available. Look into the franchisor’s history, its track record in the industry and the financial stability of the brand. Locate potential customers in the geographical area you plan to open in and investigate the franchise location and its competitor landscape.
Are there any tax advantages?
Investing in a franchise can offer some tax breaks and advantages. Talk to your tax advisor to explore the potential tax deductions available to you, such as deductions for capital expenditures, franchise fees, and other costs associated with owning a franchise.