Ask SCORE

          

Pros & Cons of buying a Franchise

QUESTION: I am considering investing in a franchise, but somewhat in awe of the many details of the franchise agreement. What are your recommendations?

ANSWER: If you have the desire to own your own business but aren’t sure if you should start from scratch, a franchise is worth considering.

With a franchise investment, you know that you’re investing in a business that has already been successful. You can see the numbers and get insights from franchisees who have experience running that exact same business.

The franchisor will typically offer the following assistance to a franchise operator:

• Financial assistance: Not all franchisors offer financial assistance but some do have financing programs available to franchisees.
• Location selection: Some franchisors will help franchise operators select a location for their franchise or they may select the location. The benefit of the franchisor selecting the location is that they have experience choosing locations that are successful.
• Training/operations manual: In order to run your business, the franchisor provides a detailed operations manual that includes instructions for carrying out its operating system.

• It establishes the rules, standards and specifications and forces the franchisor to organize and define specific job responsibilities and tasks. Before you can open your franchise business, you may need intensive training about the operating system and business as a whole.
• Advertising help: Most franchisors initiate advertising efforts, either on a national or local level or both. Some franchising companies require franchise operators to pay into a fund to cover these costs or will offer a co-op arrangement where the costs are split.

• Ongoing support: Most franchising companies offer ongoing support such as administrative (for instance, human resources and accounting) and/or technical support. Many large franchisors have hotlines that franchisees can call for support.

• Franchisors can advise on employee issues, insurance requirements and other matters relating to the operation of the franchise business.

The franchisor is obligated to provide you with only the support and services provided for in the development and franchise agreements. You should never expect more support than what is contained in the written agreements.

As with any investment you should conduct your due diligence, consult with other franchisees, and have your attorney review the document. You then have the opportunity to negotiate changes or back away from the deal.

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Gray Poehler is a volunteer with SCORE Naples. Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit https://naples.score.org/mentors . To access information for local SCORE workshops go to https://www.score.org/naples/local-workshops