Choosing the Right Franchise for You

Franchising for many people can be the easiest way to get into running your own business for many people. Unlike starting your own company based on a product you have invented or a service you want to offer, franchising brings an established brand with it allowing a new franchise to ride the wave of the company's previous performance with customers. But every franchise is not for every kind of entrepreneur or potential franchisee. There are critical factors or questions ever franchisee needs to answer to find out what franchise is for them.

It is important to remember that buying a franchise is a lot like a marriage. Two individual parties unite for the purpose of a happy union. Franchisees and franchisors come together with the hopes that the franchisee will make money for both them and the national organization through running a successful franchise. When the marriage is going well both sides are happy. When things are difficult, both sides are oftentimes guilty of blaming the other for shortcomings in their partnership.

To avoid such matters, premarital counseling or franchise counseling needs to be participated in by the franchisee. In franchise counseling several issues will be resolved that will make the decision of committing to the franchise a worthwhile transaction. Otherwise, the franchisee is setting themselves up for failure or misfortune by making a long term decision based on a limited set of facts that are but part of what they should know in making a decision.

Investment Involved

Many franchisors have established methods for identifying the costs not only of securing a franchise but also operating one for a three to five year window. Companies that avoid doing this should be redlined as companies a franchisee should avoid. When a franchisee does not know the upfront costs the franchisee walks into a business opportunity blind and devoid of reliable information to make sound business decisions. Franchisors like McDonalds are upfront about franchisees needing upwards of a million dollars in cash or available credit, including financing, in order to secure a franchise. They do this knowing that it is better to be upfront than to snowball people who will ultimately have to make an immense investment for the franchise to work. Subway, the deli franchise has an investment of between $175,000 - 225,000. For Subway that includes a franchise fee of $15,000 and expected building construction costs that near $100,000. Subway and other ethical franchisors attempt to be as concise as possible about expectations early on to ensure franchisees know how much the must invest throughout the process.

Is My Area Franchise-Friendly

Whether your community or where you want the franchise to be located is an area conducive to running this type of franchise is important to know. There are several factors that will help you make a decision such as market saturation and the closest franchise to your location. Just because you have a better idea than the guy down the street or think you can do it better than the woman around the corner does not mean the market will embrace you and your concept without question. In communities that are relationship-driven, consumers will shop with different patterns than one that is driven by economics or value. Other factors to consider are population density, shopping patterns of consumers in the trade area, and income levels of the people in that area. When you have that information you again are able to make a well=informed decision about the area you are looking at.

Get the Details

The UFOC (Uniform Franchise Offering Circular) is the one thing every potential franchisee must read before beginning any real thought on buying a franchise. The UFOC is like an investment prospectus that includes twenty-three specific bits of information about the franchise and its operations. This document includes obligations by the franchisee and franchisor, any pending lawsuits, as well as any restrictions, contracts, and fees needed for the franchisee. Additionally, any financing information that a franchisee would need is included in this document. The UFOC is the single most important read a franchisee will read before and during the franchise process. The Federal Trade Commission regulates franchisors to ensure integrity and full disclosure for franchisees.

For Subway, their UFOC includes that training occurs internationally. Because they do not offer absentee ownership, which means the owners must also operate the franchises, every owner is required to go through their mandatory training program. This training occurs in Miami, Australia, China, Germany, and India. Subway also promises ongoing support through several mediums including the Internet, field operations and evaluations, and meetings. They also promise marketing support through grand opening advertising that can be a shared expense between the franchisee and franchisor, also, they constantly run national and regional media and advertising pushing the Subway brand which helps any Subway franchise build community credibility.

When it comes to operating a franchise, entrepreneurs considering buying a franchise would be wise to get as much information as possible before proceeding with the franchisor. Just like getting in a marriage, knowing more than how something looks is the most critical piece of data one can have. There is no divorce court for entrepreneurs who feel they have irreconcilable differences with the franchisor. A divorce is subject to penalties that could add up to over a million dollars depending on how a breach of contract reads between the franchisee and franchisor. To avoid a bad relationship, do the due diligence necessary to have the facts upfront.