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Franchising allows you
to set up your own business but one
backed up by an entire business system.
The franchisor can provide training,
equipment, marketing tools and brand
recognition, which you might otherwise
have to invent from scratch if it was
your own business idea”.
There are three types of franchises:
- Product franchise – e.g. retailer or
wholesaler such as car dealership
- Business system franchise – e.g. using
franchisor’s proprietary process or
technique of doing business – e.g. fast
food outlets
- Manufacturing franchise – using
franchisor’s product components e.g.
soft drink manufacturers.
What is a Franchise Agreement?
A franchise agreement is a legal
agreement between a franchisor (the
party selling the franchise) and the
franchisee (the party buying the
franchise).
Most agreements give the franchisee the
right to use the franchisor’s marketing
or business system and its trademark
and trading names.
what should I consider when
looking to buy a franchise?
1. Your budget
Establish a buying range before starting
your search process. Pages 7 - 9 will
guide you through the costs and the
process of financing a franchise and
assist in establishing the investment
required.
2. Skills Set
When looking at franchise opportunities
don’t limit yourself to what you
already know or your current line of
work. There are a lot of franchise
opportunities that may be right for
you. You don’t have to be an expert
as the franchise system is there to
help you.
3. Being the Boss
Being your own boss entails significant
responsibility. Make sure this is for
you.
4. Location
Be prepared to drive – the right
business may not be 5 minutes from
home.
5. Retail vs Service
Retail franchises will often involve
significant fit out and establishment
costs and will often require higher
levels of investment than a service
based franchise that has no retail
presence. Depending on your level of
capital, you may consider a
service based franchise instead of a
retail based franchise.
6. New vs Existing
An existing franchise can often be
easier to evaluate.
For example, an existing franchise will
have an established clientele
(Goodwill), established store fit out,
possibly established staff and will have
profit and loss records etc. This gives
you the opportunity to see exactly
what you are purchasing. However,
the Goodwill component will increase
the purchase price of the business.
7. The Franchisor
Make sure you are comfortable with
Head Office. You are heading into a
long term agreement with them and
need to feel that the partnership will be
right for you.
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