GENERAL FRANCHISE INFORMATION FOR POTENTIAL FRANCHISEES

What is a franchise?

Franchisors allow you to purchase one of their stores for an initial fee and ongoing royalty. In exchange, you benefit by owning a business with a trademark that is already established and known. The Franchisor will then assist you in making your franchise a success by providing ongoing training and a system already in place to sell its products and services.

Why buy a franchise instead of starting my own business?

When you purchase an outlet from a Franchisor, they are committed to your success. Why? Because the Franchisor has their name on your business. They help you with everything from purchasing to advertising to managing your cash control. Buying a franchise alleviates many of the pitfalls that come with starting a business from scratch. Franchisors have developed a fool proof system based on years of experience. Let’s face it, it’s nice to have someone in your corner.

What are the benefits of being affiliated with an established franchise?

There is no trial and error. Most major franchises provide you with training to make sure that your business succeeds. Your business is also immediately known from the moment you open your doors. Franchisors have spent years creating brand awareness, which makes it much easier for their franchisees. Many also offer group advertising and purchasing to make your franchise even more profitable.

Are there opportunities for business growth associated with franchising?

Yes! Once you get started, there is no stopping you. Many franchisees have built huge fortunes by purchasing additional outlets once they are successful with their first one.

Sounds great, but what are the disadvantages?

Buying a franchise is not necessarily geared towards those individuals who like to do everything their way. There are built in controls with owning a franchise and established methods that may not give the entrepreneur the control that they desire. It’s a personal decision that you have to make based upon your own personality.


How can I use caution in purchasing a franchise?

It’s all about the numbers. You need to start by checking with your accountant to help determine what the projections are in terms of sales and costs, and ultimately, when are you going to start turning a profit. Make sure you explore each opportunity thoroughly.




What kinds of costs can I expect?

• Franchise Fee: It all depends upon how successful a particular Franchise is. Franchise fees range anywhere from $4,000 to $50,000 and most include royalty fees of 3-8 percent.
• Facility/Location: You may have to rent a facility, or buy the land and the building. Again, check with your Franchise representative to determine your alternatives. If you are renting, some Franchisors offer leasehold improvements to counterbalance increases in rent over the years.
• Equipment: Many franchisors allow you to pay off the equipment in long-term payments and banks are eager to loan you the money since the equipment also acts as collateral.
• Signs: Many Franchisors have “sign packages” that you can purchase in order for them to keep control over their brand name.
• Opening Inventory: This is all part of your package that your Franchisor will advise you on. Some Franchisors provide you with a two-week supply, but many tell you   the inventory requirements in advance.
• Working Capital: You will have to make sure you go over your numbers to make sure that you have enough cash on hand when you open. Franchisors will give you their best estimate for working capital that will cover items like rent, employees wages, utilities, etc.
• Advertising Fees: Find out in advance what is required. Some Franchisors request that you put money into a national fund that helps to create brand awareness. The benefit here is that you don’t have to worry about creating your own advertisements and your company’s name is becoming more well-known to potential customers.