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Franchising FAQ

Some of the most commonly asked questions about franchising.

Image: franchisehelp.com

Whether you’re an experienced entrepreneur or thinking about starting your first business, chances are the idea of opening a franchise has popped into your mind at some point. The franchise sector is growing consistently, not just within the US, but globally as well. Here are answers to some of the most frequently asked questions about franchising, from initial research to selling an established franchise business.

How do I know if a franchise is right for me? What are some of the pros and cons of franchising?

When you start a franchise business, you’re able to take advantage of an established knowledge base that eliminates a lot of the unknowns entrepreneurs face. You know what your costs will be and you’ll receive location and purchasing recommendations.

You won’t need to establish relationships with suppliers. In many cases, you’ll receive training and marketing assistance, and you benefit from starting with an established brand and a built in customer base.

On the flip side, franchises can be restrictive – you may have little to no control over the goods you use or the other businesses you can become involved with. You also could be faced with high initial investment costs and royalties. As well, bad press from a fellow franchisee – no matter where they’re located – can negatively affect your business.

How much will it cost to open a franchise?

It depends on the franchise. You may be able to find this information online by searching for the “(Company Name) franchising information”. This should also give you details such as a location’s typical square footage, royalty structure, review and approval processes, opening processes, and more.

The cost of opening a franchise can vary hugely, but you can expect to pay six figures to open many established franchise businesses in addition to startup costs.

I’ve found a franchise I’m interested in. How should I research a franchise to make sure it’s a solid option?

Talk to franchisors. Ask them about their top priorities, which skills are most important to ensure franchisee success, and what things franchisees should avoid in order to succeed. Ask about how franchisee conflicts are resolved, and try to evaluate whether the franchisor possesses strong managerial skills.

You’ll also want to make sure franchisors are a little selective. If they’re in a rush to sign you up without taking time to review your business history or contact references, it’s a red flag. Also, chat to franchisees to get a sense of the business’ financials and what programs that are offered by management, such as marketing tools.

Finally, you’ll want to scour the business’ UFOC (Uniform Franchise Offering Circular) cover to cover.

What’s a UFOC?

A Uniform Franchise Offering Circular (UFOC) is a document that outlines everything you need to know about a particular franchise. Before you’re able to proceed with purchasing a franchise, review the company’s UFOC which contains 23 different sections related to owning and operating the franchise.

You’ll learn about the company’s history, fees and royalties, a summary of the company’s management structure, any legal action the company has been involved with in the past, initial startup costs, and more. It’s a lengthy document, but it’s important to review it in its entirety.

Do I really need to hire a lawyer? What about an accountant?

While legal and accounting fees may seem unnecessary (and expensive), think of them as insurance payments protecting your bottom line. Make sure you hire a lawyer to help you work through any purchasing or selling paperwork. Enlisting an accountant’s help will ensure your taxes and financial records are in line – two big responsibilities you won’t have to shoulder on your own.

How do I sell my franchise?

You’ve already got an accountant and a lawyer, so two of your selling to-dos are already taken care of! Experts recommend having your business valued two to three years before you plan on selling to give you a chance to identify and fix any issues well before your sell date.

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How to Choose the Right Franchise Business

Written By: Karen Sams

Are you interested in buying a franchise, but don’t know where to start? These tips can help you choose a successful franchise.

Buying a franchise can be a solid investment for entrepreneurs looking to ease into small business ownership with the safety net of a national brand supporting them. But with so many to choose from, it can be difficult to decide which franchise is the best bet. To invest in a franchise that’s right for you, here is what you need to know:

Benefits of choosing an established brand

Choosing a popular, well known brand may seem like the safest option. According to the International Franchise Association, some of the benefits of purchasing an established franchise include national brand recognition.

Additional benefits are a built in customer base, and support from the franchisor in start-up operations as well as marketing and advertising. But buying an established franchise doesn’t guarantee success, and there are downsides.

Higher fees

The more recognizable and popular the brand, the higher the start-up and ongoing royalty and advertising fees will be. According to CNBC, there is a huge range for initial start-up fees depending on the brand you choose. You will pay anywhere from $10,000 for an emerging franchise to over $1 million for a brand with household name recognition.

“Many of these brands are super expensive topping more than $1 million to get started. For a first time buyer, that large of an investment would be foolish,” says Tom Scarda, a franchise consultant at FranChoice in Wantagh, NY.

Market saturation

With a popular brand, there is a greater likelihood that there are already many franchise locations available in your market. This increases competition and can decrease profitability for your individual franchise location. “If the company is a household name, chances are the ship has already sailed for that concept,” Scarda says.

“The best markets and best real estate are already taken by early pioneers in the franchise. Newcomers will get second tier spots that typically won’t have the same ROI (Return on Investment) as the first round of franchisees.”

Emerging franchise opportunities

For entrepreneurs, emerging franchises in hot industries can offer the sweet spot between low start-up costs and high ROI. This often means looking beyond the restaurant industry.

According to Entrepreneur magazine, the top franchise categories for 2017 included children’s enrichment, electronics, entertainment/recreation, fitness, pest control, pets, consignment retail, restoration, and staffing/recruiting. With the population aging, healthcare franchises are also growing.

Scarda recommends investing in a franchise that requires human capital to operate. “A hot franchise is one that is recession hardy, technology resistant and Amazon impervious,” he says. “If you need a person to perform the service for a customer, that is hot. An example could be a residential cleaning company or in-home senior service. The concept may not be sexy, but it is a smart, long term investment.”

Follow your passion

While some brands and industries are more likely to succeed than others, the truth is that franchises fail at roughly the same rate as private businesses. About two-thirds of businesses survive two years, and that number drops to half after five years, according to the Small Business Administration.

Like any business, a franchise is primarily driven by the passion and hard work of the business owner. The most successful franchise owners are personally invested in the brand.

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Which Franchises Are the Best to Buy in 2018?

March 26, 2018

Written By: Katie Truesdell

Restaurants, healthcare and fitness, and real estate are booming industries.

So you’ve decided to buy a franchise in 2018, and you’ve already read our guide on how to choose the right one. Before you get too attached to a certain industry, the next step is to figure out what the best performing franchises are.

Mark Siebert, CEO and senior franchise consultant for iFranchise Group, weighed in on the franchising industries that he believes look promising in 2018.

 

Restaurants

“The restaurant industry is always going to be hot in the franchise space, but it really depends on what concepts emerge that dictate its popularity in a given year,” he says. “We’ve seen a big surge recently in health conscious restaurant options, places that are serving vegetarian fare, and vegan only options.”

This is because food culture is changing, Siebert says. When it comes to food, millennials are one of the most educated generations. As customers, they demand more from their restaurant choices and increasingly opt for more vegetables, organic ingredients, farm to table options, and an overall higher quality of food.

So, while Entrepreneur’s Franchise 500 list features several long standing fast food restaurants—McDonald’s, Dunkin’ Donuts, and Taco Bell—it also includes many options that focus on healthier, higher quality food like Nekter Juice Bar and Pita Pit. No matter what restaurant you choose, Siebert cautions that the restaurant industry is extremely competitive and demands a lot of hard work.

 

Health and Fitness

“Another industry to keep an eye on in 2018 is medical based franchises,” Siebert says. “Home healthcare is a huge market right now as baby boomers continue to age. … There is no indication that it will slow down anytime soon. We’ve also seen, through medical technology advancements, some interesting health based concepts that have capitalized on telehealth to grow rapidly in the market.”

According to Siebert, one franchise option is My Eyelab, which uses telehealth technology to provide affordable eye care and exams without keeping full time optometrists on staff. My Eyelab started franchising in 2017 and closed the year with 47 sales; they want to double that number in 2018.

As for other health and fitness companies to consider, there are countless choices. Entrepreneur ranks these in the top 50 of at least one, if not more, of its Top 500 Top Brands, Fastest Growing, and Top New franchise lists:

  • Anytime Fitness
  • Planet Fitness
  • Orangetheory Fitness
  • iLoveKickboxing
  • Right at Home

 

Real Estate

Those interested in purchasing a franchise may want to investigate the real estate space.

“Based on our experience, it’s an excellent time to get into the home inspection business,” says Kathleen Kuhn, president of HouseMaster, a top ranked 2017 franchise opportunity by Franchise Business Review and a top 300 franchise by Entrepreneur. “Over the last several decades, in strong housing markets and in slower markets, the demand for home inspection has increased.”

Kuhn also notes that based on industry statistics, only 10 percent of all home inspectors in the U.S. perform more than 400 inspections per year, whereas HouseMaster franchises perform more than 600 on average.

Tim Conn, president of Image One Facility Solutions, a commercial cleaning company ranked as a top franchise by Franchise Business Review, says that they’re seeing a consistent uptick in interest.

“The U.S. Consumer Confidence Index is at a nearly 20-year high,” he says. “Beyond that, the real estate markets continue to improve. We’re past the rebound and into an era of steady growth. As a company that surrounds the real estate industry, there is an increased demand for our commercial cleaning services with real estate development as businesses expand, move into new offices, buildings, and so forth.”

 

Advantages and Disadvantages of Franchising

 

 



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