Things You Should Know Before Acquiring A Franchise

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• Things You Should Know Before Acquiring A
  Franchise

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Introduction

• The franchise company model can seem incredibly
  tempting when you start exploring small business
  trends and tips on how to start a business.

• Many people who invest in a franchise are
  realizing a lifelong desire to work for
  themselves.
• However, a lot of them lack business experience
  and frequently just leave work.

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• Good for you if you're thinking of changing
  careers and taking the entrepreneurial road!
  Being an entrepreneur is both a thrilling and
  intimidating concept. But making the transition
  to working for yourself doesn't have to be
  difficult. All you need is confidence, and you
  should also research what it's truly like to
  launch your own business. Franchisees get a
  company model that is already successful on every
  level, from marketing to operations, when they
  acquire a franchise.

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Lets Look At Some Exciting Numbers

• In Australia, there are 1120 distinct franchise
  brands.
• Ninety percent of franchised brands have
  Australian roots.
• An estimated 146 billion in sales are generated
  annually in the franchise industry.
• Online sales are used by one-third of franchise
  brands.
• The retail (non-food) sector accounts for 26 of
  franchise brands.
• 19 percent work in the hospitality and food
  industry.
• Over ten years have passed since the first
  franchise was granted by 60 of franchise brands.
• Source Griffith University's Asia-Pacific Centre
  for Franchising Excellence's Franchising
  Australia study.

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• You might benefit from a well-known brand with a
  well-liked product or service and a solid
  reputation. Additionally, you have access to
  support for advertising and marketing as well as
  operation guides to make running your business
  more efficient.
• While franchising provides you with significantly
  less control over how, where, and how long you
  run your firm, it does allow you more access to
  capital.
• It's crucial to consult a qualified business
  advisor, accountant, or franchising lawyers
  before you own a franchise. Before choosing a
  franchise, take into account the following advice.

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Knowledge is Crucial

• You must be familiar with and knowledgeable about
  the service or item you sell. Even though it
  seems clear, it happens frequently for people who
  know nothing about or have little interest in a
  particular product to purchase a franchise in
  that market. Without truly understanding the kind
  of business they want to buy into, many people
  who purchase franchises are finally able to
  realise their long-held desire to be their own
  boss.

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• Product expertise is essential when promoting a
  service or product, and franchises require you to
  take things like sales and marketing into
  account. Purchasing a franchise could assist with
  the setup of the overall structure and branding,
  but it is not required to do marketing for you.
  People who invest in franchises frequently have
  unrealistic expectations of their franchisor and
  are unaware of how much responsibility they
  actually have for running the business.

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• Even while the new owner typically receives
  franchisee training on the processes and
  procedures when they purchase the franchise, they
  are typically in charge of hiring and training
  their own staff and managing the day-to-day
  operations of the firm with minimal assistance
  from the franchisor.

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Calculate Your Financial Risks

• Financial risks are an inherent part of running a
  business, particularly when it comes to outside
  influences like competition and the status of the
  local, national, and even worldwide economy.
  There are some dangers associated with
  franchising that might not be present in other
  company models.

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• Over the course of your franchise agreement,
  you'll need to have additional cash on hand to
  cover unforeseen expenses. For instance, your
  franchisor might alter their store's design or
  operating procedures, and you'll typically be
  accountable for the associated costs.
• It's possible that regional differences in
  consumer demand exist. Some franchises or
  locations could fare well, while others don't
  experience the same level of success.
• Where you purchase your shares may not always be
  your option. Although another supplier may offer
  you cheaper goods, your franchisor may already
  have long-term agreements in place with certain
  vendors.
• You should consider your likelihood of being able
  to recoup your initial investment and turn a
  profit throughout the course of your franchise
  agreement before deciding to purchase a
  franchise.

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Understand The Franchise Agreement

• You agree to the franchise agreement for a
  predetermined period of time, typically five
  years. It specifies exactly where and how you
  will operate your franchise, and it is wise to
  seek professional advice to ensure that you are
  aware of your rights and obligations under each
  clause.
• The business you've established, as well as any
  goodwill you may have accrued, could be returned
  to the franchisor after the franchise agreement
  expires because the franchisor is not required to
  renew your franchise. Here, franchise agreement
  lawyers can help you with negotiating terms that
  will give the franchisee more protection when
  changing the franchise agreement, such as
  obtaining a protected area, for instance.

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Read Understand FDD Disclosure Statement

• The Franchise Disclosure Document, or FDD, is a
  document that informs potential franchisees about
  the franchisor and franchise network. The
  independence of any franchisee is limited.
  Franchisees must conduct their operations in
  accordance with the guidelines and limitations
  outlined in the franchisee agreement. These
  limitations often cover the types of goods and
  services that can be provided, the cost, and the
  geographical area. The amount of working capital
  that the franchisee must have on hand is also
  specified in this agreement. The FDD is the
  biggest drawback of becoming a franchisee because
  you have no control over who else can purchase a
  franchise in your area and you can't change the
  rules or the items.

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Projections of Financial Performance

• A potential avenue for litigation is financial
  performance representations. Even though it is
  now lawful for franchisors to divulge this
  information, many still hesitate out of fear of
  being sued. Previously, it wasn't even legal for
  franchisors to do so.
• However, franchisees should seek out a sign of
  the financial performance of each franchise
  system site. Although gross sales are frequently
  all a franchisee can hope to observe, their
  usefulness is limited because they do not
  indicate profitability. According to Rosen,
  anonymous reporting of the material is
  acceptable. Some franchisors will merely give a
  range, such as the proportion of sites with
  annual income between a "X" and a "Y" level.

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• The ideal financial performance schedule for all
  units would be included in the franchise
  paperwork. However, at the very least,
  anonymously reported revenue ranges should be
  included. According to Rosen, the most common
  strategy is still to offer nothing. The greatest
  approach, he continued, is "the more the better,
  even if it gets unmanageable."
• Additionally, franchisees should search for a
  segmentation by geography and by urban or
  suburban areas.

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Conclusion

• Purchasing a franchise is similar to operating
  any other type of business. The procedure
  involves certain particulars, but they are simple
  to get used to. Most of the distinctive features
  of franchising are viewed as advantages for the
  business owner, with the exception of the fees
  and dealing with franchisors.
• Franchises have become such a desirable and
  profitable investment due to this very reason. In
  recent years, aspiring business owners have been
  turning more and more to franchising since they
  view it as a certain approach to establish their
  brand or build a successful business. It also
  helps to have franchise management expertise.
  Make sure you are aware of all the aforementioned
  advice before deciding to launch a franchise so
  that nothing catches you off guard.