Is a Franchise Business Opportunity Ideal for You?

Whenever the words “business opportunity” is mentioned, a lot of people think about opening a franchise. After all, franchises afford people to have businesses able to hit the ground running. But are they truly as good as they’re alleged to be?

How Much Can a Franchise Business Opportunity Cost?

In return for the franchise fee you have to pay, the franchisor will give you a business opportunity that allows you to make money almost right away. You will be provided assistance for finding the ideal location, the best employees, and even in acquiring the kind of training you need for managing the franchise.

If you are looking into a franchise business opportunity, make sure you consider the various costs that a franchise business would entail.

Initial Expenses

The franchise fee is not the only thing you’ll have to pay up front if you’re interested in availing of a franchise business opportunity. Like with any other business, you may also have to spend on purchasing or leasing the location for your business, equipment and machineries, supplies and inventory. You will, of course, spend on acquiring the appropriate legal permits and licenses for your franchise.

Royalties

The initial franchise fee is not the only thing you’ll owe to the franchiser. Indeed, a franchise business opportunity is one you have to pay for continuously through royalties. Your franchise agreement is sure to include a condition on this, specifying the percentage of whatever income you generate and the franchisor is entitled to. Franchisors are given the right to ask for royalties in return for your continued use of their business name and everything else that comes with it.

It’s very important to read the documents accompanying your franchise business opportunity. There are some, for instance, that require franchisees to continue paying royalties until a specified period of time even though your franchise became bankrupt or you made a voluntary exit of your agreement.

Advertising Fees

Franchisees are generally asked to contribute to the franchisor’s advertising fund. This is, however, a reasonable request as your franchise can only benefit from advertising efforts made on a national and regional scale. Without those funds, you’re unlikely to afford advertising outside your local anyway.

Franchisees Are Rarely in Complete Control

That’s one thing you have to fully understand. Although a franchise business opportunity often sounds rosy, you have to be prepared to relinquish control in most aspects of running the business. Here are a few examples where you may not be allowed to make the final decision without proper consultation and approval from the franchisor.

Location

Most franchise systems have very specific conditions when it comes to site approval. Indeed, franchisors usually withhold their approval of any franchise application until they’ve completely ensured that the prospective location is ideal for the business.

If you want to impress the franchisor with your first choice of location, look for sites that are easily accessible to the franchise’s target market. Evaluate the strengths and weaknesses of your choice and think of ways to exploit the good points of the location while underplaying the bad points.

Design

In most cases, franchises have to maintain a uniform look. While they don’t have to be exact mirror replicas of the original stores or those owned and managed by the franchisor, they do have to adhere to the same design scheme. Moreover, if the franchisor implements design changes every season, franchisees are usually required to do the same. This could be quite a sudden drain on your pockets if you haven’t expected such a demand.

Restrictions

Franchisors tend to be very strict as well as to what you can and can’t sell in your franchise store. If you’re looking forward to exploring your culinary talents, a restaurant franchise business opportunity might not be a good idea. Most restaurant franchises won’t allow you to make instant changes to the menus. Suggestions may of course be welcomed, but they’ll have to be approved and tested before they can be implemented for the entire franchise system. Even though your intentions for wanting to add to, remove from, or modify the product or service line are good, they might not make a difference to your franchisor.

Franchise agreements tend to have explicit conditions as well on how a franchisee is supposed to operate the business.

As you can see by now, a franchise business opportunity might not be as good as it sounds at first. Be sure to weigh your alternatives carefully before making any decision. Good luck on finding the ideal business opportunity for you!

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