If you want to be a business owner, but you don’t want to go it alone, a franchise can be an excellent alternative. Established franchisors feel as if they have perfected an almost surefire success plan in a given industry. They may or may not own stores or businesses themselves in the franchise organization.
When franchisors sell you their plan and their idea, they expect an ongoing return for their information. This return is called royalty, and it is usually paid monthly or quarterly, normally based on sales volume. Regardless of whether you make a profit, the royalty is due. That’s why it’s based on sales instead of net profit— these people aren’t stupid! Generally, they won’t guarantee that you will even make a profit, but they will show you other franchisees’ past performance.
There are many laws governing what a franchisor can tell you, so if one guarantees you’ll make a big profit or income, you should quickly slam the door and go on to the next one. Profits are usually made by following the plan exactly and adding your own hard work.
The growth of the franchise industry in the last few decades has been explosive. Just look up and down any busy street in your town and count the franchises. I’m not just talking about fast food—it’s everything! But remember, just like a marriage, it’s a lot easier to get into a franchise than to get out of it. When you pay your franchise fee and sign the agreement, you’re part of their family. Make sure you’re comfortable with the people at the top and bottom of the organization. Give yourself all the choices before making the final decision. And don’t let anyone talk you into a
specific company—you make the final decision. Just be sure you don’t think you can change your mind later and easily switch to another franchise. It just doesn’t work that way.
There are books and magazines that list hundreds of different types of franchises, their sizes, necessary phone numbers, and the investment needed. Check your library or your local bookstore’s magazine rack and do some comparisons. Numerous websites also offer information. Just search for the term franchise, and you’ll find a lot to check out. The more information and knowledge you acquire in the beginning, the more likely you are to succeed.
One consideration when choosing a franchise as your business is that there are rules and guidelines that you must follow. You’re not an employee, but you have to go along with the gameplan. There are specific ways of doing things, mandated décor, reports to file, and guidelines that you will be expected to adhere to. You may also be restricted as to what you can sell, what to charge, and how you can accept payment. These are all parts of the proven success pattern and will be in the contract you sign. Some franchisors are more lenient than others, so you need to discuss what’s expected and whether you can live with it. The following section lists some questions you should ask to be sure you’re entering the type of business environment you really want and can live with.