Do You Really Want to Own a Franchise?
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No matter what job you have, there are probably days when you've just had it with excessive demands on your time, conflicts with coworkers or company policies, and pay raises that barely keep up with inflation. At that point, you may start thinking about being your own boss-realizing the American dream of owning your own business.
You may have thought about buying a franchise. In this business arrangement, a franchisor (the parent company) sells the franchisee (you) the right to sell its goods or services in exchange for a franchise fee. It might seem like just what you need to make a big change in your career and your life. After all, everyone already knows about Meineke Muffler, Subway, Dunkin' Donuts, Stanley Steemer, and hundreds of other businesses that have made the roads going through most of America's towns and cities look pretty much alike these days. As a franchisee, you'd have the advantage of being able to use the company's name, recognizable storefront, and trade secrets. And you've heard that franchise fees for some businesses run as low as $10,000.
But do you really know what's involved in a franchise agreement and in running a franchised business? There is much more to it than paying the franchise fee and opening the doors. While fees may seem fairly reasonable (the majority are under $40,000), that's only the beginning. You will need an upfront investment that amounts to much more than the franchise fee. For example, survey results in the article "Annual Franchising Industry Overview" ( Bond's Franchise Guides) showed an average of $27,300 for a motel franchise-but estimated start-up capital or line of credit was $6,600,000. Even a smaller-scale business category-say, a shop that sells donuts, cookies, or bagels-carries an average franchise fee of $24,676 with estimated startup capital at $261,165. In addition, most franchisors have requirements for your personal net worth.
Owning a franchise is not easy, and anyone who goes into one believing that the business will run itself is destined for failure. It carries a lot of responsibilities. In fact, you may feel that you're still working for someone else once you learn about the restrictions, requirements, and specifications that will be imposed on you by the franchisor. You will need to unerringly follow their practices and meet their standards, and you will sign a contract that says so.
The contract will also spell out what happens if you want out or can't make a go of the business. Some franchisors specify in their contracts that even if you are running the business as a corporation, you and your spouse can be sued as individuals. You'll want to hire an attorney to carefully check the whole contract over before you sign anything. You'll also need an attorney to help you obtain the business licenses you will need. If you will be selling food to the public, you'll need a license from the health department, and you will also need to always be ready for surprise inspections.
But let's say you've got enough saved for the fee, you've got a more-than solvent net worth, you feel capable of understanding and taking care of all the details, and you can borrow the rest of the money you need. What could go wrong? It sounds like a sweet deal, doesn't it?
- Do you have enough money to run the business until it starts turning a profit? This means you will have to pay employees, pay for product, make payments on your business loan, and send the franchisor a monthly royalty of 4%-8% of total sales (not of profit), depending on your contract. Other initial and ongoing costs include insurance, employee training, inventory, equipment, rent, maintenance of the site, and your share of advertising expenses.
- Was the franchisor's projection of your earnings overly optimistic?
- Is your family behind you-even willing to work with you? Does everyone realize that you will be working hard at the business location for all the hours it is open every day, and that you will be the first one there in the morning and the last one to leave at night? do they realize that vacations are pretty much out of the question for a long time now, and that even if you manage a weekend getaway, you're always "on call"?
- How well do you interact with people? You will be dealing with employees (some of them unreliable), customers (some with complaints), and your contact people at the parent company-in effect, your new bosses.
- If things get crazy, can you keep your cool?
- Did you choose a business that you actually enjoy and find exciting? Or did you just buy yourself a job that has got you trapped even worse than the one you left behind?
An Alternative Plan
There is a much less complicated way to achieve financial independence and success without jumping on a franchise rollercoaster that never stops. We offer a viable, legitimate way to earn an exceptional income without the huge investment, the loss of freedom, or the sacrifice of time with your family. As a home-based business owner, you'll work in the peace, quiet, and comfort of your own home. You'll set your own hours. You won't have employees that drive you crazy. Instead, you'll work with a support team that will mentor you in a professional, respectful manner.
You can ditch that going-nowhere job and be your own boss-without the hassle of a traditional business. For free, no-obligation information, simply fill out the web form on this page.
|Dr. Sam V.
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