According to Christopher Conner, president of Franchise Marketing Systems, businesses decide to grow franchises for many different reasons, including to receive royalties and general fees (franchisees pay for the rights to use trademark, service marks and business systems), brand development, access to capital, higher valuations, and the development of a secure, defined distribution channel.
But like any business transaction, don?t go into it blindly. Below, check out Conner?s tips on buying a franchise.
??? 1.??? Get a good understanding of where you are financially, timeline-wise and from an interest standpoint. You need to assess not only yourself, but your financial position, what kind of cash you have in place, what your liquidity is and what your net worth is.
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??? 2.??? Know who YOU are. Before selecting a franchise brand or concept, you need to fully understand your own interests, background and business abilities. What are your hobbies and interests outside of work or professional life? What are your strengths and weaknesses from a business or personal standpoint?
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??? 3.??? Research the market and as many franchise opportunities as you can. Unless you have a specific company in mind or are using a franchise broker or consultant who is helping you through the process and researching, this could be a lengthy, frustrating process. There are dozens of franchise websites and thousands of franchise opportunities out there – there are many sites out there which provide a wide variety of information on franchises.
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??? 4.??? Research your financing options. Once you have made your selection, you may need financing….in fact, even if you don’t need financing, it’s good to understand what your options are and what capital/cash is available for you should you need working capital or resources to launch your franchised business. There are numerous options, including conventional bank loans, SBA guaranteed loans, 401-K rollovers, alternative financing channels and home equity loans.
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