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 Buy A Franchise

Another option to setting up your business is to buy a franchise. In this way you do not bother about the business idea and the rigors of obtaining appropriate as someone would have borne these troubles.

A franchise is a right granted to an individual or firm to engage in a company's business within a particular territory.  The company giving the franchise right is known as the Franchisor while the one receiving or buying the franchise is known as the Franchisee

How Franchising Works

  1. A franchise is usually governed by a contract and in most cases drawn up by the Franchisor.
  2. The franchisee must follow the rules and guidelines set by the Franchisor,
  3. The franchisee may be required to pay a franchise purchase fee usually set and determined by the Franchisor.
  4. The franchisee must also pay an ongoing franchise royalty fee.  
  5. Most Franchisees are renewable in line with the contract terms.
  6. The Franchisee takes the risk of making his franchise work
  7. The Franchisee must have sufficient working capital to make his franchise unit work

Advantages of Buying a Franchise

The advantages from buying a franchise include:

  1. Established business – By buy a franchise one buys into an established business with. The corporate image and brand awareness of the company is already established. Consumers are always more comfortable purchasing items from a familiar name or company they trust.
  2. Established business model – The Franchisor already has an established business model that the Franchisee simply keys into. No need reinventing the wheel.
  3. Advertising, Branding and Reputation – The Franchisor usually bears the cost of advertising and branding and the building of the corporate image. In this way this vital business expense and trouble is taken off the shoulder of the Franchisee.
  4. Training & Support - The franchisor usually provides extensive training and support to the franchise owner.
  5. Savings in time - Since the franchise company already has the business model in place the Franchisee can focus his time and energy on running a successful business.

Types of Franchise

There are three (3) basic types of franchises and they are:

  1. Single Unit Franchise
  2. Multi-Unit Franchise
  3. Master Franchisee

Single Unit Franchises 
In a single unit franchise, the franchisee buys only a unit as defined by the Franchisor which typically covers a particular territory

Multi-Unit Franchises 
In a multi-unit franchise the franchisee can open more than one unit.   The franchisee can therefore have several units of the business located in different parts of the territory. 
Master Franchise
Under the master franchise arrangement, the Franchisor grants the Franchisee the right to operate the franchise within a particular territory and to sub-franchise within that territory. This allows the master franchisee the opportunity to grow a decent business in a fairly short timeframe.  

Factors to consider before buying a franchise

  1. Do you have the requisite training and credentials?

  2. Do you have a relevant past experience?
  3. Evaluate your strengths and weaknesses. Can you cope?
  4. Where does your passion lie?
  5. Examine your likes and dislikes. Are they in line with the franchise and business?
  6. What type of working atmosphere do you prefer?
  7. Where do you want to be in five or ten years?
  8. Your Finances. Do you have the funding required for the franchise?
  9. Do you have the time to devote to the business?
  10. Do you have the leadership qualities required for the franchise?
  11. Can you communicate the franchise details to others effectively?
  12. Do you have the organizational attributes?
  13. What Kind of Franchise is Right for You?
    a. Choose the type of franchise
    b. Choose the industry
    c. Choose the business
    d. Choose the Company

What to look for before Buying a Franchise

  1. What is the reputation of the industry
  2. What is the reputation and image of the company?
  3. What is the demand and prospects for the product and service
  4. Is there a wide market for the product and service?
  5. Does the company and product have a point of differentiation?
  6. Can the product or service be duplicated?
  7. Is the product or service saleable? Is there a high and growing demand?

The following are not good franchise candidates

  1. A product or service whose market exists only for a short time.
  2. A business with very low margins and cannot offer good returns on investment.
  3. A franchise requiring long periods of training.
  4. A personality based business e.g. dentistry
  5. A geographically defined market, product and service that does not have the potential to be repeated in many places.
  6. A failing product, business and company

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