WHO BUYS FRANCHISES AND WHY?The majority of franchise buyers are success oriented, educated, family minded and ex corporate people. These people are comfortable with long term commitments, have some business experience, and are willing to learn new skills and procedures. They have enough cash reserves for the franchise fee, start up costs and operating capital for the time period before a positive cash flow is reached. A good franchise business has been tested! You’re buying into a company with a proven track record, established operating systems and sometimes a recognizable brand. Even if the franchise is fairly new, the franchisor has done the hard work of developing the product or service and overall vision. Franchise companies provide training, structure, support, market expertise and they have a vested interest in your success! An unsuccessful franchisee is a black mark on the entire system and therefore, they make sure you are the right person for their franchise. Start up costs are predictable and you can verify actual experiences by talking to as many current and former franchisee’s as you would like. These are some of the reasons why over 90% of all franchisee’s are still in business after 5 years! Financing is available in many cases through the Small Business Administration along with the opportunity to use your IRA or 401K without penalty.
FRANCHISE BUYER/FRANCHISEE?A study conducted by the International Franchise Association pinpointed the typical franchise buyer. Franchise buyers will come from all walks of life, educational and economic backgrounds, although some of the typical traits are the following:
FRANCHISE? It is a right or license granted by a Franchise Company to a business to use the Company’s name to sell its products or services in exchange for an initial franchise fee and ongoing royalties. Franchise Companies invest hundreds of thousands of dollars in some cases to develop a strategy to gain huge market share! Although Franchise Companies account for only approximately 10-12% of all retail and service business they receive almost 50% of the retail and service dollars spent in the United States annually. Franchise Companies have sales of over 1 trillion.
ROYALTY FEE? Royalty Fee is the magic that makes the formula work. What would it cost you to hire a management, marketing, training and customer support team? The answer is a lot more than a typical owner would ever spend! The vast majority of royalties are only between 4% and 8%. A franchisor provides you with ongoing knowledge, assistance and support so you can reach your financial goals.
Franchise Process- INFORMATION: During this information gathering phase, we get to know a little bit about your background and why you are interested in buying a franchise by creating a franchise buying profile.
PRESENTATION :We present the franchises we found for you. We will provide highlights on each franchise and explain how they fit your criteria.
COMMUNICATION: We organize a phone call with the franchise companies that interested you the most. EVALUATION: Now that you have spoken with the franchise companies, they will typically send you the Franchise Disclosure Document (FDD) in electronic or paper copy for you to review.
VALIDATION: After reviewing the FDD, you will start speaking with franchisees to start validating some of the information in the FDD and from the initial phone call.
ASSURANCE: You may have some questions after the last two steps so another call with the franchise company will take place to answer these questions.
EXPLORATION: This next step is the discovery day. Most franchises have discovery days so you can meet them in person and see who you will be working with to grow your franchise.
CONCLUSION: After discovery day, you will make the decision to move forward to sign the franchise agreement for your new venture, or keep searching and start the process again.