Franchise Reviews

If you want to own your own business, you have several options. First, you could start your business from scratch. Second, you could buy an existing business. Finally, you could buy a small business franchise.

What is a Franchise?

When you buy a franchise, you buy one or more of the following:

 

• A trademark
• A brand name
• A service or product

 

The simplest form of franchising is buying a product name or trade name. More complex franchises, business format franchising, can include services such as marketing plans, training and assistance in finding a location.

Franchise Basics

Before buying a franchise you will need to:

 

• Determine whether you have the right set of skills and background for a given type of franchise
• Compare different types of franchises within an industry
• Determine how much you can invest

 

As you go through the research process and get closer to buying a franchise, one of the key documents that you will have to examine is the UFOC, or the Uniform Franchise Offering Circular. Federal and state laws require that a franchisor send you a copy of the UFOC before signing a contract or before any money exchanges hands. The UFOC will contain business and background information regarding the franchise, audited sets of financial statements and copies of forms and contracts that you will have to sign if you decide to buy. This is an essential document that will point out the strengths and weaknesses of the franchise.

Make sure that you have an attorney to assist you in the buying process. An attorney, particularly one that specializes in franchise law, can help you wade through the legalese in any agreements that you will have to sign. Of particular interest are:

 

• Sales quotas that may be required
• Tax implications of purchasing the franchise, both short term and long term
• When the franchiser has the right to pull the franchise from you
• If you can transfer ownership of the franchise to another party
• Any non-compete requirements if you start another business

 

Other questions to ask include:

 

• If the company is planning on expanding in your state, what are the expansion plans?
• Have any franchises reverted back to the franchisor? If so, what were the reasons behind this?
• Are there or have there been any lawsuits against the franchise?

 

Do not forget to interview other franchise owners to get their input. If you do this, you will have information about how well the franchisor responds to problems and get a clue as to how realistic the franchisor is about franchisees’ businesses.

Buy a Small Business Franchise: Advantages and Disadvantages

Advantages of owning a franchise can include:

 

• Being associated with a proven brand, product or service
• Having a protected territory
• Not having to search for suppliers

 

Disadvantages in owning a franchise can include:

 

• Little or no leeway in changing your business
• Ongoing fees or royalties to the franchisor
• Depending on other franchisees to maintain the franchise’s reputation