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What You Need to Know When Becoming a Franchisee

April 15, 2012 | Comments: 0 | Views: 168

A franchise is when you, as an individual, buys the rights to trade under a well established brand, such as McDonald's or Subway. On the face of it, it seems like a good deal, but, in some cases, it can be the complete opposite. Like anything in business, there are pros and cons, and it you aren't aware of the drawbacks, you may be getting yourself into something you didn't bargain for.

But before we talk about the drawbacks and what you should ask yourself before you take up an opportunity like this, lets look at the pros. When you buy a franchise, you are buying the right to trade under a brand. It has already made the mistakes, so you don't have to. People will know the brand, so you don't need to spend a ton of money on advertising and publicity. You also get training and ongoing support. It is in the interest of the franchiser that you succeed, so they will help you, sometimes even financially, to get off the ground and keep running. And even if they don't help financially, bank most likely will. The level of support depends on the franchise, but you are guaranteed to get some. You also get great locations to maximise custom and, therefore, profit.

However, things are all red wine and caviar. You will need to pay substantial set-up fees, which vary from a few thousand to tens or even hundreds of thousands of dollars depending on the franchise, and continual royalty payments to the franchiser. And when your contract is up, you will need to pay even more to renew or extend the contract in order to keep trading. You also have tight guidelines and rules to abide by. Unlike a traditional business, you can't do what you want. You are also limited on what you can do after you sell, if you are able to sell, that is, or terminate your franchise. Also, if the franchiser goes under, so do you.

So, before going ahead and buying a franchise, ask yourself the following questions.

What are my upfront and ongoing costs going to be?

How does the franchiser make money?

What restrictions do I have during the franchise and after?

Do you have any protection or guarantee from the franchiser?

Can you scale up and buy from franchises from them in the future? Do you get any benefits, like first dibs or discounts?

Are you limited on selling the franchise and does it lose value?

What other exist strategies do you have?

Are you limited on what you can do after a franchise?

I hope this has help you decide if a franchise if for you and I am sorry for any disappointment. Good luck in what ever you decide to do. I wish you all the best.

Matthew Wellington is an aspiring real estate entrepreneur and up and coming Internet Marketer. His blog, has posts that anyone interested in business will value.

Source: EzineArticles
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