Franchising is a powerful economic force, according to a study conducted for the International Franchise Association’s Educational Foundation by Pricewaterhouse Coopers, which found that a franchise opens every 8 minutes in the United States, franchising employs over 21 million people, there are 3,500 franchise concepts in 75 industries (there is life after food). Franchising accounts for 1.53 trillion in sales and 50% of all retail sales and that 1 out of 12 retail businesses are a franchise.
This is where your The Franchise Shop Consultant begins and ends. Not only do we prepare potential franchise owners so that they can make highly informed decisions about purchasing a franchise, we tell you if we don’t think you are well-suited to franchising, starting with directing you to a resource like this one, so that they better understand what franchising is about.
When a company has a great idea and wants to expand distribution of that idea, they can either try to raise millions of dollars, or they can franchise their idea. Through successful franchising, not only does the originator of the business idea have an opportunity to flourish from expansion, but each individual franchise owner can potentially benefit from the Franchisor’s experience and success. But understand: a franchise’s primary purpose is to “sell franchises.”
That being said, they couldn’t sell a franchise unless they had happy, successful owners. So the better companies have taken every step toward helping you succeed. In fact, the last thing they want is for you to fail -which is one of the reasons why they spend so much time “qualifying” you before they sell you a franchise. That’s right. You must qualify for purchasing a franchise, unfortunately they are not simply “lined up” ready to take your money.
Most franchise companies have set forth a number of criteria against which you will be qualified, such as:
Unfortunately, most potential buyers go about searching for a franchise like they would buy a dishwasher. They fall in love with the franchise product or service without really knowing whether or not it would make a good investment. There are many well-known brands out there that don’t allow you to make much money on your investment unless you own quite a few units or, they are considered “mature” and the real money has already been made. You, quite simply, have to know what you are doing.
The better route is to use a franchise Coach or Consultant – who can help you assess your skills, needs, wants, desires, goals, and match you to the franchise opportunities that would be right for you. This is where Vision Fox Franchise Consulting comes in and at no cost to you.
Our services are free-of-charge and can save you from many mistakes and much frustration. Buying a franchise is a lot like a much bigger decision then even buying a house and you should provide the same level of attention.
Will the franchise be risk-free? Of course not; there is a human factor to consider (the franchisee) as well as many other factors, and therefore no franchisor can promise success. But franchising has demonstrated time and time again its ability to reduce risk versus the option of starting a business without the benefit of a franchise system.
Most franchisors charge an initial fee (often referred to as the franchise fee) to cover the upfront costs of “setting up” the franchisee in business. These companies have often spent a great deal of money and time to establish, prove, document and then market their Franchise System. The initial fee is simply a means of their recovering some of these expenses.
However, ongoing support of the new franchisee requires additional funding. There will be certain out-of-pocket expenses required of the new owner for real estate leases, for build-out, for equipment, for licenses, etc. There will be capital expenses to market the concept, to pay employees, etc. Plus, ongoing fees (Royalties) are usually taken monthly by the franchisor, as a percentage of the franchise owner’s gross income, or a flat monthly fee is charged.
Therefore, the total initial investment for a particular franchise is estimated in that franchise company’s Franchise Disclosure Document (FDD) so that prospective owners can estimate ALL costs associated with starting up their new business.
In the right circumstances, franchising reduces the risk of getting into business. Nevertheless, your process of investigation should be extensive and methodical. Most initial buyers will say, “I don’t even know what questions to ask.” If this is true for you, allow Vision Fox Franchise Consulting to point the way for you. This is what we do.