Is a franchise contract for you?

By Lisa 0

When looking into starting a business, you may consider franchising. Buying a franchise means buying the rights to a particular company and own a “satellite location”, a smaller business at a separate location.

As a franchise owner, you could be in the position to run a well-known business with the help and support of the parent company. Companies offering franchising opportunities include, but are not limited, McDonalds, Subway, and School of Rock. 

Before buying into a franchise business, you must do your homework. Do look into the type of business , the industry, franchise prices, market saturation, financing options, and new worth requirements. By considering these items, you will have a better idea of what franchising involves and whether it is a good fit for you.

Legal Definitions

The franchising industry is one of the fastest growing industries across all business sectors. Legally, a franchise is the right an entity has to operate a store or sell products or services under the franchise agreement. In other words, a franchise is where a person has the right to offer specific products and services from a larger parent company.

Another definition of a business franchise is a business agreement where a trader allows another to use their business expertise. They are also allowed to use the goodwill of the business and share its intellectual property in return for fees and commissions or a flat rate.

The legal implications and documents of a franchise differ depending on its type. If you want to “buy into” a franchise, you will pay the usual start-up costs. You can 

In all cases, the franchise does not have to possess as many business skills and expertise as a first-time startup entrepreneur.

How It Works

The way in which a franchise works is straightforward. A person agrees to operate an established business in exchange for an upfront payment as well as any subsequent fees or royalties.

In a typical scenario, a particular company will offer a product or service and a business owner will agree to buy the rights of this company to operate as a business. The business owner uses the business name as well as offering the products and services to the public.

During the duration of ownership of the business rights, the person who bought the franchise will need to pay certain fees or royalties on an ongoing basis in exchange for the naming rights, training, and support.

In many franchises, the franchise will have the advantage of having ongoing training and support. This will allow them to get any help they need in terms of starting up the business and operating it.

At times, the franchise may need to attend regular meetings at the franchiser headquarters to get updates on new policies and requirements.

Should You Get Involved

A franchise is not for everyone. Having said that, there are circumstances when you would benefit from owning a franchise.

If you want to own your own business, selling a certain type of products or providing a certain type of service, you may benefit from franchise ownership. Buying a franchise will allow you to have a more credible, recognizable name, saving you from branding and marketing efforts of your own.  The reputable name of the franchise will help attract customers for the small business owner. Though it doesn’t mean you can let up on marketing and public relation efforts. Google reviews increase trust and reliability, but only positive ones. This means you still need to keep an eye on any negative reviews, even though you might own a franchise. People, regardless of where they are going, are going to trust reviews from verified strangers as they would for friends and family.

While many think of the restaurant industry with franchise businesses, franchising lends itself well to the service industry as well.  Instead of a carpet cleaning professional running an independent operation, they will be better off with a franchise. Other professionals such as accountants may also benefit from using a franchise, such as Liberty Tax Service, instead of operating their own firm. The reason is that professionals providing professional services have a skill or talent to focus on, and many would rather not think about learning entrepreneurship, business, and marketing.  For such individuals, a franchise will provide the training, materials, and support to meet their individual needs. However, keep in mind that sometimes success and franchise decision-making all depends on timing. See how the market is and how well your business is standing on your own before jumping in blind.

Starting a business can be a very exciting experience for anyone seeking financial independence. When looking to start up a business with limited experience, buying a franchise is helpful.  If you have questions on how franchising might affect your business, franchise contracts, or the intellectual property costs associated with some franchise contracts, please do reach out! We’d love to help clear things up for you.