How to Select Entrepreneur Business Opportunities? - Franchise

Instead of starting from scratch by trying to match a product with a market, you can always take the short cut of buying a ready made business. This has its advantages and disadvantages. if you choose well, you can avoid much of the risk and pain associated with starting up a business from scratch.
 

What is a Franchise?

 

Franchising is an arrangement whereby one party (the franchiser), which has developed a proven way of running and managing a business, licenses another party (the franchisee) and gives him the rights to operate in the same business format, trade or service mark or trade names. The business arrangement involves a legal contract between the two parties. The three components of a franchise are:

  • A stipulated way of operating the business

  • A distinctive trade or service mark

  • Payment of fee(s) - joining and on-going, and/or royalty payment

Benefits of Franchising


Selecting franchise opportunity as an entrepreneur business has many advantages. In addition to giving you a faster and easier entry into business, you also get to enjoy:

  • The security and experience that the franchiser and franchisees within the system offer

  • The benefits of an established trade or service mark; The benefits of a tested operating system

  • The benefits of joint advertising and promotion

  • The support of the franchiser - training, management, and so on

  • Reduced purchasing costs

How to Select Franchise As an Entrepreneur Business?


The benefits of selecting franchise opportunity as an entrepreneur business come with a price, in the form of an initial (franchise) fee, which is usually payable upfront to the franchiser. Very often, it also involves the periodic payment of royalty or management fees and, in some cases, renewal fees as well.
 

As a franchise business has to operate strictly in accordance with laid-down procedures and in premises that conform to a specific design, the franchisee often has little control over how much starting capital he needs to come up with. The figure will be determined instead by the franchiser, who will also very likely be supplying the equipment and systems and arranging for the designing and renovation of the premises.


Evaluating a Franchise


Note that there are franchisers who are more interested in making quick money from the sale of franchises than in growing their businesses. They just have to develop a great business concept, prepare a beautiful business plan, start an outlet, get some publicity and announce that they want to help the unemployed, retrenched or those who have opted for voluntary separation schemes, to be their own bosses.


Here are some questions to ask and factors you have to look at when selecting franchise opportunity as an entrepreneur business:

  • Need. You make great waffles. Do you really need to pay ABC Waffles $50,000 to use the name "Auntie Wong's Waffles", buy your raw materials from her and make and sell waffles her way?

  • Flexibility of operations. When you operate under a franchise, you will have to do it exactly the franchiser's way. You will probably not be able to implement your own ideas or sell other products.

  • Franchiser. Is it well known or reputable? What about its track record? Who are the people behind the business? Check their background and financial standing.

  • Franchise or business. Is the business really viable? What support or back-up services can you expect from the franchiser? Is it only interested in making money upfront from the sale of franchises? What are the costs involved? What are the various fees you have to pay? Is the franchise territory clearly specified?

  • Franchise agreement. Study it carefully. Check if all the terms are clearly spelt out. Seek legal advice if you are in doubt.

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