What Is A Franchise?
The definition of a “Franchise” is legally binding licensing agreement by a franchisor that grants a franchisee the rights to sell a product or service under the franchisor’s business name within a defined geographic territory. In layman’s terms, franchises allow you as an investor to own a local store like a Subway, McDonald’s, or even a professional football team like the NFL or a professional basketball team like NBA.
Franchises usually have a defined franchise fee (often time ranging between $20,000-$50,000) that helps cover the initial costs of onboarding a new franchisee (including any fees paid to franchise development representatives and franchise brokers and an internal account manager). The overall investment amounts can range a lot, but for smaller bricks and mortar franchise, the normal range is between about $250,000-$750,000 per unit. Larger healthcare and education franchises can oftentimes cost over $1,000,000 per unit, and sports franchises may cost billions of dollars to acquire.
Whenever possible, it’s helpful to look at the FDD (Franchise Disclosure Documents) for any franchise that you are interested in investing into. Most FDDs include an “Item 19” section that will disclose the financial information of 1 or more stores so that you can get an idea of what the yearly revenue and profit numbers look like. It’s usually a bit of a “red flag” if a franchisor doesn’t have an Item 19 or doesn’t have any existing franchised stores with franchisees that you can talk to about how they feel about the business that they invested into.
Additionally, it’s important to understand whether the franchise is an “owner operator” model or if you can typically hire other managers to run the store. Many investors end up buying themselves a second job when profit margins aren’t where they need to be, and it’s important to understand ahead of time whether you are buying yourself another career or if it can become a passive income situation.
If you’re interested in finding a franchise to invest in, there are 2 major places to start:
- Franchise Portals
- Franchise Broker Networks
Top 18 Franchise Portals:
Here are the top 18 Franchise Portals out there. You can browse from a list of hundreds of franchisors and do your own due diligence to find out which ones you are interested in. Once you find one that you like, simply fill out the form there and those companies will contact you.
Top 13 Franchise Broker Networks:
Here is a list of what we consider to be the top 13 Franchise Broker Networks. These are companies that you can speak with that can help you identify which franchise would be best for you.
A Guide to Franchise Ownership: What It Is and Why People Buy Them
For many budding entrepreneurs, buying a franchise can be an attractive option. Whether it’s because of the financial stability associated with joining a larger brand or the potential for rapid growth via franchising, entrepreneurs are increasingly looking into buying franchises. So what is a franchise? How does one go about purchasing one? And why do people choose to buy franchises instead of starting their own businesses from scratch? This guide will answer all those questions and more while providing you with insight into the world of franchise ownership.
What Is A Franchise?
A franchise is essentially an agreement between two parties: the franchisor and the franchisee. The franchisor owns the brand and provides resources to help run business operations, such as training, support, marketing materials, and more. The franchisee has to pay a fee to the franchisor in order to use their brand name and resources. In return, the franchisee is usually given exclusive rights to operate within a certain geographic area.
Why Do People Buy Franchises?
People buy franchises for many reasons. For starters, buying a franchise can be less risky than starting a business from scratch since the franchisor provides guidance, resources, and existing brand recognition that can help make day-to-day operations easier. Additionally, by joining an already established system of operation (the franchise system), it is easier to scale up quickly with minimal hassle. Furthermore, owning a franchise comes with fewer financial risks because you would be splitting costs and profits with the franchisor, meaning you don’t have to bear all the burden of failure on your own.
For those who are passionate about a certain brand or product, buying a franchise can also provide an opportunity to become intimately involved in that business. Additionally, since franchisees enjoy more autonomy than employees of large corporations, there is greater satisfaction gained from owning and successfully running a business.
How Do You Buy A Franchise?
Buying a franchise involves several steps. First, you will need to research franchises and find the one that best fits your interests, goals, and strengths. Consider aspects such as the amount of money it would cost to purchase the franchise license, whether or not the franchisor offers support and resources, and the amount of autonomy you would have running your business.
Once you have selected a franchise, it is important to thoroughly review the franchise disclosure document (FDD) and familiarize yourself with all aspects of the agreement. The FDD contains information about the franchisor’s financial state, as well as detailed descriptions of how they will be assisting their franchisees. After this initial review process, you can start to negotiate the terms of sale with the franchisor in order to get a better deal.
Finally, once both parties are in agreement on all aspects of the purchase and operation of the business, you can move forward with buying your franchise. This step usually involves paying the franchisor, signing a contract that outlines all responsibilities of both parties, and then finally, opening your business.
In conclusion, franchise ownership can be an attractive option for entrepreneurs looking for stability or rapid growth in their business ventures. It is important to carefully consider all aspects of buying and operating a franchise before moving forward with the purchase. By understanding what franchise ownership entails, researching potential franchises, negotiating terms with the franchisor, and following all other steps in the process accordingly, you can set yourself up for success as a new franchise owner.
If you would like to speak with us about potentially having us help drive quality franchise leads for your franchise please fill out our Contact Us form.
Entrepreneur with a focus on Lead Generation, Google Adwords, Bing Ads, and Conversion.