Making a career transition after a long retirement can be intimidating, and purchasing a franchise is no exception. The International Franchise Professionals Group (IFPG) guides aspiring entrepreneurs through the process of selecting the right franchise for their investment needs. In this guide, we’ll give recently retired executives the information they need to feel confident and empowered when considering franchising opportunities.
Buying a franchise is a major commitment of both time and money, and it’s essential to do your homework before jumping in. This guide will cover the basics of franchise ownership, from understanding the financial aspects and assessing the franchisor’s track record, to researching the ongoing operational requirements and obligations of franchisees. With an awareness of those foundational elements, you can better assess each opportunity, understand your rights and responsibilities, and—most importantly—avoid costly mistakes when purchasing a franchise.
What is a Franchise?
A franchise business is an established company with a proven business model that has agreed to sell or license its rights of operation to individuals interested in starting their own business. It has a legally-binding relationship between franchisor and franchisee, in which the franchisor grants the franchisee the right to use its trademarks, business systems and processes, and other proprietary assets to sell products/services identified with the company’s brand.
Each franchise agreement will be slightly different, as franchisors must customize their offering to the target franchising demographic. Depending on the structure of the franchise agreement, protocol & procedures, training & support, and franchisee fees may vary drastically from one franchise to another. It’s essential to closely examine all legal agreements and requirements when considering investing in a franchise.
What are the Benefits of Owning a franchise?
For recently retired executives, franchising offers the opportunity to become an entrepreneurial business owner without re-inventing the wheel.
By investing in a franchise, you have the benefit of the franchisor’s established brand presence and consumer recognition. Specifically, the franchisor provides the following:
• A tested business model with a documented plan for success
• A recognized brand with established customer base
• Comprehensive training in operational procedures
• Ongoing marketing and/or advertising assistance
• A support system for the growth of the business
What are the Challenges of Owning a Franchise?
Purchasing a franchise provides you with a business with built-in support, but there are still a few important points to consider before diving in.
• Restrictive Covenants and Franchise Fees – Many franchisors have restrictive covenants in their legal agreements, including territorial limitations and marketing restrictions. Depending on the franchise fees, these restrictions may be difficult to negotiate.
• Costs – When you purchase a franchise, you will be responsible for upfront costs, such as franchise fees, as well as ongoing expenses, such as royalties and marketing fees.
• Reliance on Franchisor – As a franchisee, you are ultimately relying on the franchisor to provide product, services, and support. Depending on the franchisor, you may be required to adhere to specific procedures and practices in order to remain a franchisee.
What Types of Franchise Agreements Are Available?
Franchise agreements may vary from company to company, but some of the most common types include:
• Single-Unit franchises – This is the most common type of franchise, and it is often sold on an exclusive basis. In these cases, the franchisee pays an initial fee, ongoing royalty fees, and typically receives particular rights to a unit such as location, size and type.
• Multi-Unit franchises – These franchises are similar to single-unit franchises, but they provide the franchisee with the option to own and operate multiple units under the same brand.
• Master Franchises – This type of agreement is typically restricted to experienced business owners. The master franchisee agrees to own and operate several units in a specified territorial area, but also is responsible for recruiting other franchisees and overseeing the brand’s operations in the region.
Conclusion
Taking the plunge and investing in a franchise is an exciting prospect, but it’s essential to do your research and understand the financial and operational requirements.
As a former executive, you already understand how important it is to carefully review the potentials before investing. With a comprehensive understanding of the basics of franchising, you can make an informed decision as you embark on this next venture and smoothly transition into the world of franchising.
Topics:
