I was presented an franchise opportunities. Is a relatively small business that seems to have potential to grow. What are some things I should check before joining?
Franchise opportunities
- Thread starter Danny46709394
- Start date
Depending on the franchise agreement you can be beholden to ordering *everything* from the corporate office. Everything from packaging to furniture to cleaning supplies to food. It all comes at a significant markup, often with penalties for being caught using things that aren't from the corporate office. So if you're looking at how much things cost, make sure you're using the actual cost of what you're obligated to buy and not just an estimate of what it would cost on the open market.
For example, if you're making sandwiches and a head of lettuce at the grocery store is $1 then the head office (no pun intended) will charge you $2 so factor that into your cost/benefit analysis.
For example, if you're making sandwiches and a head of lettuce at the grocery store is $1 then the head office (no pun intended) will charge you $2 so factor that into your cost/benefit analysis.
Franchises are usually much better for the franchiser than the franchisee.
I’ve dealt with a few over the years, first thing I would do is go talk to as many other locations as you can, not just the 2 or 3 they recommend. Those owners will always be positive or they wouldn’t give you their contact.
Is the business really something that needs a franchise? You’ll basically be giving the franchiser a cut of gross sales right off the top, even if you’re losing money every month they want their fee and often another % for advertising. Can you open a similar business without them?
Do their locations have a history of closing shortly after opening? You’ll be on the hook for 5-10 years in most franchise agreements.
Do you have a ability to deal with your suppliers directly, a lot of franchise agreements state you need to deal only with approved suppliers. Often this is at an inflated price with the franchise office getting a “rebate” which is just a nice way of saying they are taking a kick back. Same deal with your lease, you may only be subletting from the franchise office.
Will you have a protected territory, and if so how big and do you get first shot at another location opening in your area.
There is a lot more than this to look into but this is where I would start.
Just my 0.2 but most small franchise are not a great deal. You would be far better off to buy an existing business where the owner is willing to spend a few weeks training you than going the franchise route.
