Selecting a Franchise Business

Although the success rate for franchise business is significantly better than for many other start-up businesses, success is not guaranteed. One of the biggest mistakes that you can make is to be in a hurry to get into managing a franchise opportunity. If you shortcut your evaluation of a potential business franchise, you might neglect to consider other franchises that are more suitable for you. Don't be "pressured" into a franchise that is not right for you. Although most franchises are managed by reputable individuals, as in all industries, some are not. Also some franchises could be poorly managed and financially weak.

This Managing the Best Franchise Opportunities Guide is designed to assist you in investigating your options and get you all the business franchises information you need. Questions needed to adequately evaluate the business, the franchisor, the franchise package, and yourself are included.

What is a Franchise Business?

A business franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group seeking the right to use that identification in a business. The franchise governs the method for conducting business between the two parties. While forms of franchising have been in use since the Civil War, enormous growth has occurred more recently. Industries that rely on
franchised business to distribute their products and services touch every aspect of life from automobile sales and real estate to fast foods and tax preparation.

In the simplest form, a franchisor owns the right to a name or trademark and sells that right to a franchisee. This is known as "product/trade name franchising." In the more complex form, "business format franchising," a broader and ongoing relationship exists between the two parties. Business format franchises often provide a full range of services, including site selection, training, product supply, marketing plans, and even financing. Generally, a franchisee sells goods or services supplied by the franchisor or sells goods or services that meet the franchisor's quality standards.

Benefits of a Franchise Opportunities

There are a number of aspects to the franchising method that appeal to prospective business owners. Easy access to an established product as well as a proven method of marketing reduces the many risks of opening a business. In fact, Small Business Administration and Department of Commerce statistics show a significantly lower failure rate for franchisee-owned businesses than for other business start-ups. The franchisee purchases, along with a trademark, the experience and expertise of the franchisor's organization. However, a franchise does not ensure easy success. If you are not prepared for the total commitment of time, energy, and financial resources that any business requires, this is the point at which you should stop.

Investigate Your Business Franchise Options

As in all major business decisions, nothing substitutes for thorough investigation, planning and analysis of your options. This Guide is designed to help you set up a systematic program to analyze the possibilities and pitfalls of the franchised business you are considering. Use the questions below to guide your research and cover all the bases. Read the full Guide before you begin to gather the information you will need.

Sources of Business Franchises Information

You will need at least the following sources of information as well as experienced professional advice:

A directory of franchise businesses

such as the Franchise Opportunities Handbook (published by the U.S. Department of Commerce and available from The Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402). Others are available at your library.

The disclosure document

A Federal Trade Commission rule requires that franchise and business opportunity sellers provide certain information to help you in your decision. The FTC rule requires the franchisor to provide you a detailed disclosure document at least ten days before you pay any money or legally commit yourself to a purchase. This document includes 20 important items of information, such as:

Names, addresses, and telephone numbers of other purchasers

A fully-audited financial statement of the seller

The cost required to start and maintain the business

The responsibilities you and the seller will share once you buy

Current franchisees

Talk to other owners and ask them about their experience regarding earnings claims and information in the Disclosure Document. Be certain that you talk to franchisees and not company-owned outlets.

Other references of Best Franchise Opportunities

You should get more information and publications from the Federal Trade Commission, the Better Business Bureau, the local Chamber of Commerce and associations, such as the International Franchise Association (1025 Connecticut Ave., N.W. Washington, D.C. 20076).

Professional advice

Finally, unless you have had considerable business experience and legal training, you need a lawyer, an accountant, and a business advisor to counsel you and go over the Disclosure Document and proposed contract. Remember, the money and time you spend before it's too late may save you from a major loss on a bad investment.

What is the business franchise?

Is the product or service offered new or proven? Is the product one for which you have a solid background? Do you feel strong motivation for producing the product or providing the service?

Does the product meet a local demand? Is there a proven market?

What is the competition?

If the product requires servicing, who bears the responsibilities covered by warrantees and guarantees? The franchisee? The franchisor? If neither, are service facilities available?

What reputation does the product enjoy?

Are suppliers available? What reputation do they enjoy?

Who is the franchisor?

Visit at least one of the firm's franchisees, observe the operation, and talk to the owner. You need to determine reputation, stability, and financial strength of the franchisor.

How long has the franchisor been in the industry? How long has the firm granted franchises?

How many franchises are there? How many in your area?

Examine the attitude of the franchisor toward you. Is the firm concerned about your qualifications? Are you being rushed to sign the agreement? Does the firm seem interested in a long-term relationship or does that interest end with the initial fee?

What, if any, restrictions apply to competition with other franchisees?

What are the terms covering renewal rights? Reselling the franchise?

Again, use your professional support to examine all of these questions. Some of the contract terms may be negotiable. Find out before you sign; otherwise, it will be too late.

Once you have Determined what Kind of Company you want to Begin and The investment requirements, you are prepared to decide on a
location. The number of aggressive companies already in the area should influence your choice of location. Some areas are
bombarded with support stations or certain forms of restaurants. Check on the amount of your type of company from Census figures,
the yellow pages, or by personally checking out the location.

Factors Aside from the potential market, availability of Workers And number of aggressive companies must be considered in choosing
a place. For example, how adequate are utilities - sewer, water, electricity, gas? Parking facilities? Police and fire protection?
What about housing and environmental factors such as schools, cultural and community activities for workers? What's the normal
price of this location in taxes and rents? Check on zoning regulations. Assess the enterprise of the local business-people, the
aggressiveness of civic organizations. In summary, what's the town soul? Such aspects should provide you an idea to the city or
town's future.

Chambers of Commerce and nearby universities usually have made or Are familiar with local polls which can provide answers to those
questions and the a number of other questions that will happen to you.

Then you must decide in what area of city to find. If the city is Very little and you're establishing retail or service business,
there will most likely be little choice. Just one shopping area exists. Cities have outlying shopping centers along with the
central shopping area, and shops spring up along principal thoroughfares and neighborhood streets.

Consider the shopping center. It is different from other locations. The shopping centre construction is pre-planned as a
merchandising unit. The site was intentionally selected by a developer. On-site parking is a frequent feature. Clients may drive ,
park and do their shopping in relative speed and safety. Some centers provide weather protection. Such amenities make the shopping
center an advantageous location.

There are also some limitations you should know about. As a renter, You become part of a retailer group and must cover your pro
rata share of their budget. You must keep shop hours, light your windows, and place your signs according to established rules.
Many communities have restrictions on evidence and the middle management may have further limitations. What's more, if you're
thinking about a shopping center for your first store you may have an additional issue. Developers and owners of shopping
facilities start looking for successful retailers.

The type and variety of merchandise you take helps determine the Kind of shopping place you select. By way of instance, clothing
shops, jewelry shops and department stores are more likely to be successful in shopping districts. On the flip side, grocery
stores, drug stores, filling stations, and bakeries do better on principal thoroughfares and local streets outside the shopping
districts. Some kinds of shops customarily pay a very low rent per square foot, while others pay a high rent. At the"low" class
are furniture, grocery stores and hardware stores. In the"high" are cigar, drug, women's furnishings, and department stores.
There's not any hard and fast rule, but it is helpful to observe in which type of area a shop like yours often appears to
flourish.

After determining an area ideal for your type of business, Obtain as many facts as you can about it. Examine the competition. How
many similar businesses can be found nearby? What does their sales volume seem to be? If you're establishing a shop or service
trade, how far is it that people come to exchange in the area? Are the traffic patterns favorable? If most of your clients will
probably be local inhabitants, research the population trends of the region. Is population increasing, stationary or decreasing?
Are the folks native-born, blended or mostly foreign? Are fresh ethnic groups coming in? Are they mostly laborers, clerks,
executives or retired men? Are they all ages or principally retired, middle aged, or young? Judge buying power by checking average
house rental, typical real estate taxation, number of telephones, number of automobiles and, if the figure can be obtained, per
capita income. Larger shopping centers have this sort of information out there, and will make it accessible to serious potential
tenants.

Zoning ordinances, parking availability, transport facilities And natural obstacles - such as hills and bridges - are all
important factors in finding any sorts of business. Possible sources for this information are Chambers of Commerce, trade
associations, property businesses, local newspapers, banks, city officials, neighborhood merchants and private observation. If the
Bureau of the Census has developed census tract data to the particular area in which you're interested you will find this
especially valuable. A census tract is a small, permanently recognized, geographical place within a large city and its environs.
The Census Bureau provides population and housing characteristics for every tumor. This information could be valuable in measuring
your market or service potential.

Choosing the actual site within an area might well be taking what you May get. Not too many plants or buildings will be
appropriate and at precisely the same time, accessible. If you do have an option, make sure you consider the possibilities
carefully.

For a manufacturing plant, consider the condition and suitability Of the construction, transportation, parking facilities, and the
sort of lease. For A store or service establishment, check on the closest competition, traffic Flow, parking facilities, road
location, physical facets of the building, Type of lease and cost, and the speed, cost and quality of transportation. Additionally
Investigate the history of the website. Find answers to these questions as: Has the Building remained empty for any length of
time? Why? Have various Kinds of Stores occupied it for short periods? It might have proved unprofitable for them. Websites on
which many businesses have failed ought to be avoided. Vacant buildings Don't attract traffic and are generally considered poor
neighbors, so check on nearby unoccupied buildings.