Three Critical Planning Tips for Potential Franchisees
Posted on: 7 March 2018
Prospective small business owners favour franchising because of the relatively low risk. In general, when an individual establishes a completely new enterprise, they must build the brand from nothing. The chances of failure are quite high. However, if the business is linked to a popular franchise, there will be no significant concerns related to brand recognition. However, this does not mean that you are guaranteed success if you become a franchisee. If you do not plan carefully, your store could fail prematurely, and you will experience extensive losses. Here are practical tips to help you promote the chances of your success in your chosen franchise.
Check the Business Structure
You should choose a business structure which will protect your investment if you decide to become a franchisee. There are numerous structures that franchises in the modern market adopt. The available systems have their benefits, but you must think about your specific situation and the potential risks. When evaluating the possible structures, you should compare the setup costs for the business. You should also evaluate the compliance expenses, tax rates and your personal risks before making your decision on proceeding as a franchisee.
Understand the Franchise
You should conduct comprehensive research on the franchise you wish to join before committing to the new business. Often, prospective small business owners only consider the public image of a franchise before making a decision. In some cases, they find that the truth is harsh. Therefore, you should make time for obtaining essential information. You should learn the reputation of the franchise and the brand in your local market. If the people in the area have no interest in the product, you will suffer a great loss. You should inquire about the relationship between the franchisor and the franchisees. If there are legal cases and numerous complaints, you might want to reconsider your stand. You should also learn the expansion plans for the franchise, required investment and the company history.
Review the Agreement
You should review the franchise agreement with care because it will govern the entire legal relationship between you and the franchisor. This document is a long-term contract which does not often offer scope for indiscriminate withdrawal. Therefore, it is advisable to consult a franchise lawyer for legal counsel before signing the agreement. There are multiple elements that you should study keenly when reviewing the contract. The most critical of these issues include your obligations, the franchisor's responsibilities, fees payable, minimum performance criteria and the conditions of business resale and contract renewal.
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