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What to consider before you buy into a franchise

On behalf of Warren Gammill & Associates, P.L. | Apr 29, 2019 | Contract Disputes

Do you dream of owning your own business? Has a franchise opportunity come your way that seems like it might be a perfect fit for your aspirations?

Before you sign any agreements, you need to make certain that you understand as much as you can about how franchising works — and the particular franchise you’re considering.

Here are some points to consider before you buy a franchise:

1. What ownership means with a franchise

When you buy into the franchise, you’re essentially buying the right to use another company’s name, products and business model. That obligates you to uphold certain practices — so you can’t usually deviate much from whatever standards the franchise has for its franchisees. That may or may not be something you’re comfortable with — especially if you prefer to do things your own way.

2. Where your money is going

When you open your own business, your financial investment goes to all your startup costs. With a franchise, your initial investment goes to directly to the franchisor. You’ll have to pay for the licensing rights, the equipment and the necessary training to operate the store as expected. You need to do some careful calculations to see how long it will take you to make back your initial investment.

3. The company’s success rate

There are a lot of franchise opportunities out there — but that doesn’t mean that they’re all winners. You have to use some strategy when you decide which franchise to operate. Examine the local area to see what kind of demand you think there is for the product you’d be selling and what kind of competition you’ll be up against. (Remember, not every community wants or needs another Lululemon store.)

Naturally, you want to make certain that you have an experienced business attorney review any contract you’re considering signing for a franchise. That’s the best way to protect your interests and make certain that the terms aren’t slanted against you in some unfair way.

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