Franchise opportunities can be excellent business opportunities, but it is important to know how to approach them and get answers to all of your questions beforehand. Franchising can offer less control than if the entrepreneur owns their own business. A franchise refers to a business model in which the owner of a business sells the rights to their business model, name and logo to an entrepreneur to use.
There are two common types of franchising which include product and trade name franchising or business format franchising. The entrepreneur benefits from the brand recognition of the franchise, the good will, marketing and promotions of the franchised business. The entrepreneur, however, will have to follow rules related to running the business established by the franchising business they are paying for. While the entrepreneur may have less control, they will also have more guidance from the franchising company than if they were on their own.
Whether the entrepreneur is deciding to franchise or purchasing an existing business, there are several important considerations to take into account. To begin with, it is important for the entrepreneur to review their financial situation and determine their budget which can help them determine if franchising or buying an existing business is better for their situation. It is also helpful to evaluate the entrepreneur’s skills and experience and whether the type and level of guidance common when franchising is the best option for their skills and experience. It is also important to review existing infrastructure to choose the best course of action for the entrepreneur’s circumstances.
The decision to purchase franchise rights or to buy an existing business is a big one that should not be taken lightly. Potential buyers should be familiar with the range of resources and options available to help them with the success of their endeavor.
Source: U.S. Small Business Administration, “Buy an existing business or franchise,” Accessed May 1, 2018