Yes, You CAN Afford a Franchise! (Infographic)

Do you want to own a franchise, but always thought it was too expensive? If so, then Tracy Stapp Herold has provided you with a wonderful gift: a list of franchises that you can purchase for less than $50K - with some even below $5K!  

Now, this is primarily a legal site; so, if you are interested exploring this opportunity, you must first understand some of the legal basics of franchising.  According to US Legal:

  • A franchise exists when “an owner of a trademark, trade name and/or copyright gives another individual or entity a license (under certain conditions) the right to use such trademarks, trade names or copyrights in providing goods or services to the public”. 
  • The “franchisor” is the one who owns the intellectual property and the “franchisee” is the one who receives the license
  • Both the franchisor and franchisee are independent contractors. Thus, the franchise is business relationship.
  • The franchise agreement determines the terms of the franchise relationship.
  • Both the franchisor and franchisee can be a corporation, sole proprietorship, or partnership.
  • “There are laws that restrict termination of some franchises. In some states, prior notice of termination is required. Owners of automobile dealership franchises are protected from termination of their dealerships in bad faith.”

Now that we have a basic legal understanding of franchises, according to Doug Bend, there are 4 common pitfalls that you should try to avoid if you intend to utilize this business opportunity.

a)      Hidden Fees

b)      Lofty Average revenue figures

c)       Strict Boss

d)      Difficulty leaving

Bend believes you can best avoid these pitfalls by talking to other franchisees.  As such he was kind enough to give you a list of 10 questions to ask so that you can get an accurate sense of things. These are:

1. In hindsight, would they still make the investment?
2. How much management and industry experience did they have prior to opening the franchise?
3. How much working capital do they recommend you keep in reserve to make sure you have enough financial cushion for the franchise location?
4. Have they been subject to any litigation or bankruptcy as a result of the franchise?
5. What is the unique value proposition of the franchise for the customer?
6. Are there similar, successful businesses in the area?
7. How long did it take them to earn a reasonable income?
8. What was their total investment, including unexpected costs?
9. Was the franchise training adequate?
10. Has the franchisor provided adequate ongoing support?

Click on this infographic and get access to Tracy Herolds complete list of 87 franchises (with multiple options for each price range).

I wish all the best to everyone who chooses to buy into a franchise. Just remember that in this business relationship, verification is key!

Posted on August 19, 2015 and filed under Start-up, Intellectual Property, Contracts and Negotiation.