Small Business Franchises

Thinking About Buying a Franchise?

Small Business Franchises are a popular way of starting your own business, as it cuts out a lot of the groundwork normally done before you can open your doors to customers.

You can avoid the hard work involved in defining your business concept and analyzing the market and the competition. You do not have to spend time working out how to set-up your day-to-day operations, or how you will reach your target market, as most of this work has already been done for you!

Basically there are two different types of small business franchises, one based on products and another based on the business format. The ones people are most familiar with are the franchises that provide you with a proven business format.

Product Franchises are arrangements with a manufacturer (the franchisor) who gives the franchisee the rights to distribute a product or range of products using the manufacturer's name. These franchises are usually limited to a specific geographic area or location. The manufacturer receives a fee from the franchisee or royalties on the sale of the products.

Business Format Franchises are much more sophisticated. The Franchisor has developed a 'transferable' business system that can be taught to other people. Usually the Franchisor has already developed a well-known name or trademark, image, reputation and business format which they are willing to share with franchisees for a price.

Each franchisee operates as an independent small (or sometimes not so small) business using the business methods developed by the Franchisor. The Franchisor may retain responsibility for sourcing product, training of franchisees and 'whole of brand' marketing (i.e. national or international marketing), but the franchisee will be responsible for the day-to-day management of their own business. He or she will own the assets of the business, deal with customers, and employ their own staff.

However, many small business franchises will impose fairly operating and content standards on their franchisees to maintain the quality and consistency of the services or products provided using the franchise name. If one franchisee does the wrong thing and adversely impacts on the 'brand', all franchisees and the franchisor will also be adversely affected! Doing the wrong thing can result in termination of the franchise agreement, and the franchisee will lose their investment in the business.

Advantages of Small Business Franchises

Buying a franchise is one way of starting a business that has an established business format, with tried and tested operating procedures and an established brand.

As a franchisee you would expect to be able to take advantage of most if not all of the following advantages:

• The business already has a recognized name or brand,
• All of the promotion materials you will need to get the word out about your business have already been designed and tested in the market,
• You are part of a network of businesses that can provide support and guidance while you build the business,
• You benefit from any research and development done by the franchisor,
• Someone has already worked out how much stock to carry, which accounting methods to use, and which business controls you will need, and will provide you with operations and procedure manuals to follow, and
• You will have access to ongoing training and support from the franchisor in a wide range of business management areas.

Disadvantages of Small Business Franchises

Franchising sound good, doesn't it? Careful, there are some disadvantages as well!

• You may not like the amount of control the franchisor has over your business operations,
• You will have to pay the franchisor in one form a or another (i.e., an annual fee or royalties) for the life of your business,
• You are dependent on another organization for anything that is centrally controlled,
• There are restrictions on the sale or transfer of a franchise business, so you may work you butt off building a business that is very difficult to sell,
• You may not be able to do some of the things you would like to do with the business, because it contravenes the franchisors guidelines, and
• Being a franchise does not guarantee success.

How to Find a Franchise

You can find a franchise just about anywhere.

Franchisors advertise in local and national newspapers, in the Yellow Pages and on the Internet. You could also try a business broker. If you know someone who has been successful with small business franchises in another area) and it appeals to you, ask him or her for the contact details of the head office.

Is There a Good Fit Between You and the Small Business Franchise?

It is highly unlikely that a Franchisor will try to sell you one of their franchises unless you have the necessary skills and qualifications to provide the services, or to manage the business. So I am assuming that you do meet the franchisors pre-requisites.

But is the business a good fit for your personality?

Have a good look at the business model. Is there anything in there that you would not be comfortable doing? If cold calling leaves you cold, but is the primary method used by franchisees to find new clients, you may have a problem. If it leaves you cold, you either just won't do it, or you won't do it very well. And that will not bode well for success as a franchisee for that particular business.

Is there a lot of customer contact? Not good at meeting new people? Again, you may have a problem.

Do you have trouble following other people’s rules? Maybe starting your own business would be a better option for you than buying a franchise!

Be honest with yourself, and be honest with the franchisor. It is in both your interests to find a match (between you and the business model) that will result in success.

Signing the Franchise Agreement

Buying a Franchise will require you to sign a Franchise Agreement.

Be Aware!

The franchise agreement is a legally binding contract, whether you read it or not! Make sure you do read it, ask questions about anything you do not understand, and get independent advice! As I said above, it is a legally binding contract.

Before you sign anything, talk to a lawyer about the terms of the contract, and talk to your accountant about the business model.

	Enter your search terms Submit search form
	Web www.how-to-start-a-small-business.com

Return to top of Small Business Franchises

Return to top of Small Business Startup Options

Home | Privacy Policy | Contact