Pros And Cons Of Buying A Franchise – Identify the main advantages of franchising. Explain franchise options and industry structure. Describe the process of evaluating a franchise opportunity. List four reasons for buying an existing business and describe the business valuation process. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
A marketing system that revolves around a two-way contract where the franchisee operates the business on terms set by the franchisee. An entrepreneur whose authority is limited by a contractual agreement with the franchisor. will observe and comply with the other party’s terms Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Pros And Cons Of Buying A Franchise
Proven Business Line Potential for Success Pre-Franchisor Training Financial Assistance Franchisor Assistance Management Benefits Franchise Limitations Initial Franchise Fee Expenses Royalty Payments Advertising Expenses Limitations on Business Operations Loss of Franchisor Independence ing All rights reserved.
The Pros And Cons Of Running A Franchise Restaurant
Requiring site approval to limit sales territories and imposing store type requirements that require specific hours of operation to limit the goods/services that can be sold Advertising restrictions Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Note: This is only an estimate of the capital required to open and operate your salon in the first 12 months after opening for business. Great Clips does not guarantee that you will not incur additional costs to start the business. Exhibit 4.2 Source: April 27, 2004. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Franchise Agreement The legal agreement between the franchisor and the franchisee Franchisee The franchise privileges granted in the franchise agreement Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Brand and Business Name Franchising Grants the right to use a widely recognized product or name franchise business format Provides a complete marketing system and ongoing guidance from a licensed master franchisor An independent company or individual defined as a sales agent with responsibility for finding new franchisees in the territory Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Advantages & Disadvantages Of Buying A Franchise
Ownership of Multiple Units Ownership of more than one franchise by one franchisee A franchisee from one company is individuals or companies that obtain the legal right to open multiple franchise locations in a specific area. Host Store Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Selecting a Franchise Opportunity Personal Observation Advertisements Prospective Franchise Research Information Sources Independent and Third Party Sources Federal Trade Commission Internet Franchise Consultants Existing Franchisors and Former Franchises Disclosure Documents Copyright © 2006 Thomson Business & Professional Pub. All rights reserved by us.
Subway Curves 7-Eleven Inc. Kumon Math and Reading Centers Jan Pro Franchise Int., Inc. The Quizno’s Franchise Co. Jani-King Coverall Cleaning Concepts Liberty Tax Service Jazzercise Inc. RE/MAX Int’l., Inc. Jackson Hewitt Tax Services Choice Hotels International. WSI Internet Dunkin Donuts Action Internet. Baskin-Robbins USA Co. Great Clips, Inc. Rezcity.com The UPS Store Source: “The Race Goes to the Swift,” Entrepreneur, February 2004, p. 80. Reprinted with permission from “Entrepreneur” magazine. © 2004 All rights reserved. For subscription information, call Exhibit 4.5 Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Advantages Decreased capital requirements Increased management incentives Speed of expansion Disadvantages Decreased control Increased profit sharing Operational support costs Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Advantages And Disadvantages Of Franchising
A franchise agreement signed with legal counsel includes a termination and transfer clause and a statement of rights to renew the agreement Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
A Rule 436 Federal Trade Commission Uniform Franchise Application (UFOC) is accepted by the Federal Trade Commission as a document satisfying its franchise disclosure requirements Court requirements and bankruptcy history Investment requirements Disclosure of conditions affecting the renewal, termination or sale of a franchise. All rights reserved by us.
Capture current operations and relationships Reduced uncertainty Fast start-up Lower cost Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Reasons to buy an existing business to reduce some of the uncertainties and unknowns that come with starting a business from scratch. New business or franchise costs to start a business faster than starting from scratch Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Buying A Cafe
High Chances of Success Low Planning Existing Customers/Suppliers Equipment Needed Low Cost Experienced Staff Existing Business Records Existing Problems Poor Quality of Existing Staff Poor Business Image Modernization Needed Purchase Price Based on Misinformation Poor Business Location Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Due Diligence Practice due diligence, including a reasonable person’s careful evaluation of a business opportunity Wait for the experts Rely on the experts Accountants Lawyers Other experienced business owners Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Reasons for selling a business Owner’s age or illness Desire to relocate to another region of the country Decision to accept a position with another company Business Exclusive Sales Franchise Industry Nonprofit losses Immaturity and growth potential Beware of potential sellers who may be “ready-made.” more attractive. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Review financial statements and tax returns for the past five years. Recognize that financial information can be misleading. Overstated assets Overstated/understated expenses Underreported income Unrecorded debts Adjust asset values to reflect the true position of the business. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Advantages Of Buying A Franchise Over An Independent Business
Calculates the value of the company’s assets; Does not reflect the value of the company as a going concern. Comparable market valuation considers the selling prices of comparable companies; The difficulty is finding comparable companies. A cash flow valuation compares the expected and required rates of return on the amount of capital invested in the business. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Competition Future Market Community Development Legal Obligations Union Contract Building Product Pricing Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
Purchase Terms Terms of return upon full or partial payment of the purchase time of the assets or entire entity. Sales Tax Certificates Seller Payment Agreements and Guarantees Copyright © 2006 Thomson Business & Professional Publishing Closing sales best managed by third party billing. All rights reserved by us.
Product and Business Name Franchise Franchise Business Format License Multi-Unit Developer Ownership Area Franchise Disclosure Document Uniform Franchise Offering Circular (UFOC) Applicant Eligibility Screening Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved by us.
The Pros And Cons Of Franchising Your Business
To operate this website, we collect user data and share it with processors. To use this website, you must agree to our Privacy Policy, including our Cookie Policy. Franchising is a type of business model in which a franchisor grants the right to use its trademarks, products, services and operating systems to an independent business owner known as its own. Franchise
Franchisees operate their business using the franchisor’s established systems and processes while benefiting from the franchisor’s brand recognition, training and support.
In return for these benefits, the franchisee pays the franchisor an initial franchise fee and ongoing royalties. Franchise business models are most often used in the retail, food, and service industries, but can be found in many other industries as well.
In this article, we have listed some pros and cons of franchising to help you make an informed decision when starting a franchise.
The Pros And Cons Of Buying An Existing Franchise
If you want to start a franchise business but your investment is low, learn how to buy a franchise with no money down. You can also explore our topics where we have compiled a list of franchise opportunists according to their required capital.
Discover the pros and cons of franchising and learn how a professionally prepared franchise business plan can help you overcome challenges and maximize your franchise’s potential for success. Our expert services provide the guidance you need to make informed decisions.
Franchising offers a number of benefits, including access to established brands, proven business models, franchisor training and support, and the ability to leverage their marketing and operational expertise.
Franchising reduces risks and allows the franchisee to operate under a recognized brand with a successful track record. Franchisees benefit from the franchisor’s experience and support and minimize the risks associated with starting a business.
How To Get A Loan For A Franchise
Franchising offers financial benefits such as lower initial investment requirements compared to starting an independent business. It also allows the franchisee to take advantage of the franchisor’s economies of scale when purchasing materials and supplies.
Some potential disadvantages include payment of current fees or royalties to the franchisor, restrictions on business freedom, compliance requirements.
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