Thinking of Buying a Franchise?

At some point most Americans realize working for someone else in this day and age could be a dead end or even worse an un-secure situation. Let’s face it a "real job" just doesn’t cut it anymore and is a far cry from the American dream With America’s current growth of outsourcing and pay raises that can’t even keep up with inflation a majority of Americans are looking for a way out, some may already have a clear vision and others just know they need to declare independence from the rat race any way possible.

A franchise agreement may seem like just what you need for a change in your career and life. After all, everyone already knows about Subway, Midas Muffler, Dunkin Donuts, Dominos, and thousands of other businesses that have lines the streets and filled the strip malls of North America. Hopefully the information brought to light here can save you the years of frustration that most new business owners experience when attempting to work the traditional brick and mortar business or start a franchise.

As a franchisee you’d have the privilege of being able to use the company’s name and recognizable storefront, and trade secrets. Franchise fees can be quite reasonable (most under 40K) but that’s only the beginning.

You will need an upfront investment that amounts too much more than the franchise fee. For example, survey results in the article "Annual Franchising Overview" (Bond‘s Franchise Guides) showed and average of $27,300 for a motel franchise-but estimated startup capital or line of credit was $6,600,000. Yeah that’s with 2 commas. OK that’s a motel; how about a small-scale shop that sells donuts, pizza, cookies, chocolates, or bagels that carries an average fee of $24,676? Estimated startup capital was still a whopping $261,165. In addition to arranging this financing most franchisors will have requirements for your personal net worth so call the accountant you are going to want to look good on paper. Oh and call your lawyer too, your going to want them to go over the contracts. These contracts will bind you to the franchisors terms, which will include restrictions, requirements, and specifications that will be imposed on you forever. You must also qualify for licensing.

But let’s say you’ve got enough saved up for the fee, you meet all the requirements, and attain the proper licensing, it sounds like a sweet deal, doesn’t it, what could go wrong?

Owning a franchise is not easy, and anyone who goes into one believing that the business will run itself is destined for failure. In fact, you may feel like your still working for someone else once you discover all the responsibilities that come along with a franchise agreement. You will be dealing with employees (some unreliable), customers (some complain), and your contact people at the parent company-in effect, your new bosses.

Do you have enough money to run the business until it starts turning a profit? Factor in payroll, employee training, equipment, rent, maintenance, insurance, inventory, payment on the business loan, and don’t forget to send the franchisor a monthly royalty of 4%-8% of the TOTAL SALES (not of profit)!!!

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