What You Need to Know About Starting a Franchise | Franchise ...

If you?ve got a dose of entrepreneurial drive but you?d like to minimize your risks and maximize your returns, franchising can be an excellent alternative to starting a business from scratch. A franchise offers an affordable means of accelerating expansion and?achieving development goals more quickly and with less risk. When you buy a franchise, you get to be in business for yourself, but not by yourself. Read on to find out what you need to know to get started.

What is Franchising?
Franchising refers to the practice of using another firm?s successful business model. ?A franchisee sells goods or services supplied by the franchisor or that meet the franchisor?s quality standards. The franchisor lends the trademark or trade name and business system, and the franchisee pays a royalty and an initial fee for the right to do business under the franchisor?s name and system. Top franchises include Hampton Hotels, McDonald?s, and H&R Block.

How is Franchising Regulated?
The Franchise Rule, which is enforced by the Federal Trade Commission (FTC), requires franchisors to prepare an extensive disclosure document and give copies to any prospective franchisees. The disclosure document is called a Uniform Franchise Offering Circular (UFOC) and includes information about the franchisor?s background, initial and ongoing costs, restrictions, terminations, training, advertising, current and former franchisees, and more. You must receive the document at least 14 days before you are asked to sign any contract or pay any money to the franchisor. Be sure to have an attorney as well as an accountant review this comprehensive document.

How Much Money Will I Need to Buy a Franchise?
According to the International Franchise Association, the initial franchise fee for most franchisors is between $10,000 and $30,000. Depending on the industry and the type of business you select, total start-up costs can range from $20,000 to over $1,000,000, with the average investment ? excluding real estate costs ? being $350,000 to $400,000.

How Much Will I Earn as a Franchisee?
Unfortunately, you might not get a hard and fast answer to this question, because franchisors are not required to disclose information about potential income or sales. If they do make claims about earnings, they must be able to substantiate those claims and make that documentation available to you. Any earnings claims can be found in the UFOC (item 19).

What Kind of Support Will a Franchisor Offer?
As you research franchise opportunities, you need to examine what each franchise relationship entails. Depending on the particular franchise, you can expect to receive assistance in finding and developing a location, as well as initial and ongoing training, products and equipment, marketing and advertising support, and more. This kind of support ? as well as the proven track record of a successful franchise ? is what you?re paying for when you choose to invest in a franchise.

How Can I Purchase a Franchise with Confidence?
One of the best ways to ensure a positive franchise experience is to talk with at least 10 of the company?s current and former franchisees. (You can find these people listed in the UFOC.) Contact franchisees from different areas of the country and different markets to get a diverse sample of experiences. Ask current franchisees about their return on investment, and ask former franchisees why they left. If the majority of the people you contact are satisfied with the franchise, odds are good that your experience will be positive as well.

Ready to dig deeper? Check out the FTC?s Consumer Guide to Buying a Franchise then get started on searching for franchise opportunities at the top right.

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Source: http://owner.franchisejunction.com/2012/08/16/what-you-need-to-know-about-starting-a-franchise/

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