Business Franchise

“We are not so rich to buy cheap things,” the proverb says. Is it right about buying a franchise? Maybe… But before choosing between the high-cost and low-cost franchise in the same industry, I suggest you to think over the following information.
 

When you buy the low-cost franchise, the franchisor will never provide the same start-up assistance, training, advice or preferences as if you were investing in the high-cost franchise. So, one of the first questions you have to answer to yourself is to decide what assistance you REALLY need.  If you are a complete novice at this business, I think that it would be better to get a bit more (and to pay more too). But if you are only expanding your rather successful business, the information and assistance (that every franchisor must provide) may be absolutely enough for you.
 

So, it means that you have to know what help you’ll get for sure according to legislation. All the rest depends on franchisor’s willingness.

According to the FTC, franchisors must provide:

1. One copy of the Uniform Franchise Offering Circular. You’ll get it in at least 10 days before you sign the agreement
   
2. One copy of the franchise agreement, other contracts and franchisor’s financial statements with estimates of initial start-up costs (operation capital, equipment, construction and rent costs and so on)
   
3. At least one week of practical training for you and your manager in a parent company
   
4. Operational manual
   
5. Ongoing support
   
6. Guidelines on audits and assignment procedures
   
7. Other criteria for assignments, such as ownership rights and rights to sell the franchise
   
8. Initial fees, royalty and other costs information
   

At the same time your potential franchisor may provide some additional help. You need to take into consideration that this usually increases your payments. This additional assistance may include:

1. A marketing plan, promotional materials and site selection assistance
   
2. Adequate insurance for fire, inventory, burglary, workers’ compensation, accident and health, occupancy and general liability
   
3. A known trademark or service mark, or advertising to make it known
   
4. Guidelines on purchasing inventory and equipment, restrictions on goods sold and terms of agreement and renewal
   

The last word about “must” or “should”: remember that in different states and countries the franchise legislation is different. Spend some time to check your rights as a franchisee. And maybe you will change the proverb for yourself: “We are not so rich to buy high-cost franchising and to pay for the help that we don’t need!”

This entry was posted on Monday, May 15th, 2006 at 11:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.