Before Franchising?

Franchising a food business, for example, means that you’ll no longer be in the food business. This is because you’ll be teaching others how to start, manage, and run a food business of their own. The McDonald’s franchise does not sell burgers, it teaches prospective franchisees the McDonalds’ business model of how to sell burgers. Now, before leaving your restaurant, make sure that teaching is really what you want. Otherwise, franchising may not be the better option for you.

All too often, the decision to franchise is made based only upon the fact that the business is franchisable. There are, however, many other considerations. For instance, what impact will the franchise make on your business? Franchising means that there will be changes (often significant ones) on how the business is managed and run. This means that there will be additional responsibilities for the owner.

What type of financing will also be required? Is a loan better than financing everything with liquid money? Obviously, skill sets also have to be considered. Where will you obtain the necessary skills in planning, implementing, and managing the franchise? Finally, what alternatives for expansion exist other than franchising? Are these alternatives more appropriate for your business type? These, among others, are only some of the things you need to ponder on.

Geography also matters. Think very carefully before Franchises for sale your business in other states and countries. Each time you enter a new location, your business will fall under new legislation or vastly different cultural norms.

As such, you also risk exposing your enterprise to new liabilities, licenses, fees, and other unexpected obstacles. It may be wiser to expand first in the same state before branching out further.

As with any other business change, budget is crucial with Franchises for sale. You will have to plan for the cost of preparing the franchise documentation, manual, creating and registering the necessary logo and trademark, and producing the franchise sales packages. In the early stages of the franchising process, expect to have high expenditures and low revenues.

Many new franchisors assume that front-end franchisee fees will cover most Franchises for sale expenses then they will generate profit for themselves. Common expenses include costs for site selection, lease and franchise negotiations, franchise sales, franchisee evaluation, construction supervision, and training. In fact, in many new franchise systems, franchisee fees are often not high enough to cover the direct costs of establishing a franchise unit.

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