What to Consider When Looking into Franchising in Memphis, Tennessee
Starting up a business is a major undertaking for any prospective investor or franchisee. While it’s a great way to become your own boss and realize financial security, the average person can quickly become overwhelmed in their search for the right business to open, as well as in their research of the important risks and rewards associated with a successful venture.
Franchising is gaining traction as a viable way to more easily launch a business. It’s an option often explored by those who are just starting their entrepreneurial path in Memphis, Tennessee. With franchising, a franchisee has more guidance and support from the franchise—notably, through oversight of the brand’s marketing, customer service, and operational standards.
However, the concept of franchising also comes with a unique set of concerns and considerations—from the cost of the franchise to the franchisee’s autonomy and authority. It’s important to research the ins-and-outs of what franchising entails, so what follows is an overview of the things prospective Memphis investors and franchisees should carefully think about before entering into an agreement.
Is a Franchise Right for You?
It’s important to consider why franchising might be a more sensible route for prospective investors and franchisees to take, compared to starting their own independent business. First off, a reliable number of proven businesses—such as fast-food outlets and clothing retailers—already exist in franchised markets.
In addition, there’s usually assistance from the franchisor in terms of research, product and marketing development, training, and more. This removes some of the significant work and financial outlay that is required when commissioning an independent launch.
The franchisee has the advantage of an already established system that helps address common business challenges, including those related to setting up or modifying a business model and customer relations. Furthermore, in some cases, the franchiser may even provide or contribute to the financing when the franchise is opened.
Ultimately, if owning a business and being in business is less of a fascination or novelty, but instead the goal is to succeed and make money, then franchising can be a great option. Franchising comes with fewer risks than starting up an independent business, but investors and franchisees should take the time to make sure that the financial and potential market gains match up with the costs associated with running a franchise.
Research Your Selected Franchise
Once prospective investors and franchisees find a franchisor that could be a good fit, they’ll need to do their homework. Any franchise agreement is a long-term contract that could mean a number of years in business and a major financial commitment. It’s important to understand all of the expenses associated with the franchise you’re selecting—including those that may not be outlined in the agreement, such as stamp taxes, municipal taxes, annual taxes, lawyer’s fees, and more.
Aside from the financials, also get to know the franchiser’s actual business model in as much detail as possible. What kind of support does the franchiser offer? How does the franchiser ensure that the franchisee has access to the original brand name? What are the expectations of the franchiser regarding how to run the business?
Finally, understand the broader industry as much as possible by talking to other franchisees and doing your own market research. Nearby businesses may have a lot to tell you, and your research may uncover any competition that the franchiser may not share.
Alongside this, check into the local regulations. Different cities and states have distinct regulations for businesses of different types. Depending on the franchise, there may be a specific set of guidelines for Memphis, Tennessee. These should be taken into account when considering the franchising opportunity.
Draft a Solid Franchise Agreement
Because franchising is an agreement between two parties—the franchiser and the franchisee—it’s imperative to cover both the franchiser’s and franchisee’s interest in a water-proof contract. This is achievable with a thorough agreement that includes formulas for determining the franchise’s profitability and outlining how the franchiser and the franchisee share the profits.
Also make sure that the contract stipulates how the franchiser will provide assistance to the franchisee. This could encompass how the franchiser manages the supply chain, proffers marketing assistance, and so on. The franchise agreement should also include provisions regarding renewals, the transfer of ownership, and the duration of the contract.
Before signing, it’s essential to have a lawyer familiar with franchise law review the document. Because of the long-term commitment, it’s worth asking the franchiser for a draft before getting out the checkbook.
Before signing the agreement, calculate the costs carefully. Keep in mind all the related costs, such as for the premises, rent, inventory, staff, working capital, as well as the initial franchise evaluation and the royalty fees.
In the end
Franchising can be an excellent way to start and grow a business—as long as you’ve done your research and taken into account the potential risks and the associated costs. Gather as much information as possible before signing up with any franchise and operating it in Memphis, Tennessee. Investigate the industry, the franchiser, the market limitation-opportunities, and the agreement and contract before going forward and be sure to get legal advice along the way.