How To Buy A Franchise

Things To Consider When Buying A Franchise

How To Buy A FranchiseUnderstanding how to buy a franchise and buying a franchise can be a lucrative business opportunity, and a reliable method to achieve financial independence.

Franchises exist for every niche in almost every industry imaginable, but not many people know how to buy a franchise, or what to look for when buying a franchise.

The following resource has been created to share some of the business objectives that need to be considered when buying a franchise business.

Why Should You Consider Buying A Franchise?

Buying a franchise is one of the most “turn key” business opportunities available today. Unlike traditional small businesses and start-ups, franchises offer a streamlined operation from years of research, so emerging entrepreneurs can just sign an agreement and launch their franchises. Franchises have built-in branding and marketing to capture and grow a customer base quickly. Additionally, franchises offer a support network to ensure continued success, growth, and expansion for as long as you are enrolled in the franchise system.

What Is The Best Franchise To Buy?

There is no one correct answer to this question. Some people like to follow consumer trends, and buy franchises based on “the next big thing.” For example, there is a market for high-quality ingredients and Mexican food. However, when it was becoming a trend, franchises that catered to that particular market did not exist throughout the country. People following consumer trends seized on this, and bought franchise operations from Chipotle and have been generating healthy revenues ever since. On the other end of the spectrum, there are people who are more inclined to buy a franchise that is based on something that is timeless. The reason behind this is that the economy has its ups and downs, so buying a franchise centered around something many people want or need, at very affordable prices, will guarantee steady revenue. For instance, many people have cars, and owning a franchise that specializes in automotive maintenance is a very stable franchise purchase. Likewise, with healthcare franchises, IT support franchises, electronics, janitorial franchises – the list goes on. There are also people who buy franchises for the sole purpose of flipping them for a profit. These franchise owners can spot a need or trend in a particular location, and buy a franchise to start. After they get it running and turning a healthy profit, they will sell the franchise at a profit and move onto the next franchise venture. Because not all franchises require owners to work on the front lines, people will purchase a franchise, hire people to manage the daily operations, to automate the business as much as possible, from an owners perspective. Then the franchisees can go about finding a buyer or working with a franchise broker to flip the business for a profit like commercial real estate investors do with houses and other properties.

Where To Buy A Franchise

There are a number of methods available to people who are interested in buying a franchise. The main, and most direct method is to reach out to the franchisor. This can be done on the corporate website, by talking with existing franchise owners or contacting a franchise representative. A franchise representative exists to explain what is involved in buying a specific franchise, the initial interview with potential buyers, and to act as a liaison between the franchisee and franchisor. People can also buy a franchise through franchise brokers. There are franchise brokers who run websites with large listings of existing franchises, which we will cover later on in this article.

Buying A Franchise You Like

When people think about buying a franchise, they often feel they are restricted to fast food restaurants and similar businesses. The truth is that franchises have grown up and diversified greatly over the decades. There are franchises available in almost every industry imaginable. There are seasonal franchises, franchises in technology, home improvement, vehicle maintenance, healthcare, pest control, taxes and accounting, luxury travel, and much more. Buying a franchise in an industry that appeals to you will help your entrepreneurial ventures seem less like “work” and more like a hobby that happens to generate revenue.

Buying A Franchise That Is Scaled To Your Level Of Experience

Buying a franchise is very appealing to people who have never owned or run businesses before because operations are streamlined to remove the majority of the guesswork and stress from entrepreneurship. Additionally, it is rather easy to buy a franchise that is scaled to your comfort level and managerial style. There are small franchises, which can be run from home with a computer and dedicated phone line. There are medium sized franchises which require a small workforce and can be run behind the scenes, taking care of accounting and sales, while employees deal directly with customers. On the far end of the scale, there are franchises like resorts and luxury hotels, which employ can employ hundreds of people, plus subcontractors for cleaning services and maintenance, and can cost millions of dollars. Buying a franchise can be easy, and the revenue usually scales to the initial investment, but make sure you are not getting in over your head by buying a franchise that is too big or expensive to handle.

When Buying A Franchise, Stick To Your Budget

Buying a franchise can run to some serious money. If you have a budget range, stick to it. There are hundreds, if not thousands, of franchises ranging from a few thousand dollars, on up to multiple millions, depending on the size and scope of the operation. Franchisors usually require people to have capital reserves in excess of the required amount for start-up. The reason is that certain factors, such as real estate and construction – if it is required – are variable and cannot be calculated down to the exact amount ahead of time. If you are looking to buy a franchise, your franchise representative will go over the suggested amount of capital to cover costs. Again, you should have a budget, and not go beyond that amount, because any extra capital may be necessary to cover unforeseen costs.

In addition to the initial financial investment, buying a franchise business can entail additional franchise costs that cover marketing, inventory, employee salaries, property rental, software licensing and a host of other add-ons. If you are buying a franchise that requires a physical location, such as a restaurant or automotive center, you should be prepared to purchase – or at least lease – commercial real estate. The franchisor will go over everything required, as well as a very close estimate of the cost of each item on the list. When buying a franchise, always break down the bottom line cost to see exactly what you are paying for in order to run your business.
Most franchises offer a support network to help during those times when unexpected situations arise and threaten to slow down operations (or worse, interrupt the cash flow of the franchise). Franchise owners advise that when researching franchises to buy, look into how accessible the support network is before you invest. When buying a franchise, most support networks offer support from other franchise owners in the immediate area, to offer additional employees when there is a shortage, or to transfer inventory if there is a shortage or overage. At a higher level, franchises offer support for things like conflicts that fall under the responsibilities of the human resources department, cash flow solutions, as well as any logistical problems that may arise.
Remember that when buying into a franchise, the parent company has the final approval on many of the business decisions. For franchises that require a brick and mortar storefront, the franchisor has the ultimate say in the site location. Franchisors also dictate the hours of operation, sales territory (to avoid infringing on another franchise’s customer base), periodic renovations to be in-line with certain promotions and standards, as well as (in some cases) salary limits and incentives for employees. When buying a franchise all corporate guidelines will be laid out in the Franchise Disclosure Document. The Franchise Disclosure Document, or FDD, lays out all of the guidelines and operations used by the franchisor, along with requirements such as fees, marketing, and reporting. The FDD also lays out the corporate hierarchy, including the names of the people in the top positions, and agreements the franchise has with other companies, and the financial performance of the franchise. The Financial Disclosure Document has been a mandatory part of buying a franchise since the 1970s, when the Federal Trade Commission started requiring franchises to be as transparent with potential buyers, to avoid conflicts of interest, and to keep franchisees protected against any surprise charges or changes in business direction. Approximately two weeks before any final decisions are made, the franchisor will send over the Franchise Disclosure Document for your perusal.
When buying a franchise business, entrepreneurs are entering into a contractually binding agreement with the franchisor. The best advice from successful franchise owners is to hire a franchise attorney to go over the fine print of the contract before committing to any agreement. Franchisors often reserve the right to terminate franchise contracts or refuse renewals to franchise owners, forcing them to sell their operations to other potential candidates. Always research the details of any franchise contract. All of the details should be explained in full throughout both the franchise offer, the franchise agreement, and the Franchise Disclosure Document. However, to make certain, or to clear up any confusion or doubts, you should seek the advice of a franchise lawyer. Which brings us to our next point.
There are many lawyers who deal in business ventures, but there are some who specialize in franchise transactions. Franchise lawyers will go over the franchise offer, the agreement, and the Franchise Disclosure Document and put the legalese into plain English, so potential franchise buyers know exactly what they are getting into, and what is required of them. Franchise lawyers will also be able to tell potential owners how the franchise requirements line up with state and local laws, in case there is any extra work – such as getting zoning permits and business licenses – that needs to be done on the part of the franchisee before officially launching the business. Most law firms have franchise lawyers, but independent franchise attorneys can be found in your state, and even online. Before buying a franchise, it is imperative that potential buyers get a franchise lawyer to explain everything.
When buying a franchise, it helps to get to know a franchise owner who is partnered with the company you are researching. Develop a professional relationship and find out exactly how operations run on the front lines, and how involved the franchisor is in ensuring the success of franchise owners. Take time to discuss what is involved on a daily, weekly, monthly, and yearly basis. Shadow them, if you can. Ask them tough and candid questions. Ask how the franchise business compare to what they initially envisioned when first buying a franchise, and how it compares to what the franchisor presented. Ask if there are any particulars they wish they’d known before buying a franchise and entering the world of entrepreneurship. This will give you a clear idea of whether or not a particular franchisor is a good fit for the goals you want to achieve.

Many franchise opportunities have a fairly hefty investment cost. When buying a franchise business, it helps to research if the franchisor will work with you to secure loans and other financings to keep your operation afloat until the business hits its stride. Most people do not have the capital on hand to pay up front and in full when buying a franchise. Additionally, every franchise owner will tell you that you should never put all of your personal finances on the line to start a business of any kind. There is no sense in jeopardizing your own financial solvency simply to launch a business. Maxing out all of your credit cards and cashing in stocks and bonds to purchase a business will put you in dire straits and tank your credit rating in no time flat. Fortunately, there are a number of financing solutions available to help people purchase and launch franchises without going broke in the process. Franchisors offer financing options to offset the initial costs involved with buying a franchise. Some franchisors will offer lending programs through their own financial partnerships. Check out the payment terms and interest rates, and figure out how long it will take to pay down any loans to the point of starting to maximize profits. Some franchisors offer special financing of their own. Some have special inroads with equipment dealers to lease proprietary equipment and appliances for your franchise. If you are buying a franchise that requires a physical location built to the franchisor’s specifications, you may need to seek outside financial assistance to acquire commercial real estate and arrange proper construction. For first-time franchise owners, traditional bank loans may be out of the picture. Banks typically want to see a strong financial history and experience with borrowing and repaying loans. Instead, many franchise owners turn to SBA loans and other small business financing solutions to get their operations launched successfully.

Buying An Existing Franchise

Sometimes it makes more business sense to buy a franchise that is already in existence, rather than starting one from scratch. There are a few ways to go about buying a franchise that is already up and running. The first is to reach out directly to the franchisor. All franchises have exit plans for owners who are reaching retirement, or who are moving onto other business ventures. They can help arrange a transfer of ownership so that the existing owner can move on, potential franchisees can get the businesses they want, and the franchisor continues to generate revenue from that location. The second method is to consult with a franchise broker. Franchise brokers usually have a list of existing franchises for sale, and work as liaisons between all parties involved to ensure the transition goes smoothly. Either way, buying a franchise that already exists can help prospective owners save a lot of money on start-up costs. Because a franchise is virtually automated, the transition in ownership will not cause a drop in sales or employee morale.

Buying A Franchise With Growth Potential

It is important when buying a franchise to research the growth potential of the company. Some franchises are limited by territory in a given area. Others only exist in certain regions of the United States. If you are eager to buy a franchise and have dreams of expanding and owning multiple establishments, it is important to find out how much room there is for growth from the franchise company, if there are plans for expansion into new territories, and how long it takes a franchisor to get to the point where opening another franchise becomes a viable option. Some franchise owners have become very successful business owners by buying multiple franchises and hiring managers to keep operations running smoothly at each location.

Buying a franchise is a fairly straightforward business venture. Whether you are buying a new or existing franchise, the business model is streamlined to maximize profitability. However, before buying a franchise, we invite you to consider another option for starting a business of your own. One that provides unlimited earning potential, without the start up costs involved with a traditional franchise, and a business which you can truly call your own and run without a need to hire staff or build an establishment.

Want A Better Opportunity Than Buying A Franchise?

The Commercial Capital Training Group (CCTG) offers the support network and full training that people seek when looking to buy franchise businesses, but CCTG does not have the added costs for marketing, business owners can run operations out of their homes, and the investment is well below what most franchisors offer.

Emerging business owners who participate in CCTG’s training learn to become commercial finance professionals – bringing in many thousands of dollars from a single deal, building residual revenues, and dictating their own hours. With the Commercial Capital Training Group, people get a business they can truly call their own, bypass the royalty and branding costs, and achieve financial independence on their own terms while helping other business owners secure the financing they need.

At The Commercial Capital Training Group, we offer all of the tools and training to launch your business. Our team of experts provides around the clock support, and we invite you to draw from our 80-plus years of combined experience for the small inquiries, on up to the most complex questions about marketing and closing sales with clients. We offer a recession-proof business model, so your products and services will always be in demand, regardless of how the economy is performing.

However, we also differ greatly from traditional franchises. When you are buying a franchise, you are beholden to brandish the franchisor’s logo, so your business is not truly your own. The Commercial Capital Training Group will help you launch a business with your own chosen name, logo, and marketing materials. Our experts will design everything for you, from the logo, to the website, brochures, and anything else you would like to make your business stand out in today’s competitive marketplace. Going one step further, all of your successes are your own. There is no franchisor or corporate logo stamped on your revenue. There is also no work schedule. You can work according to your lifestyle, from the comfort of your home.

If you would like to own a business of your own, with a lower initial cost than buying a franchise, and with unlimited earning potential, contact The Commercial Capital Training Group. We offer the training and support you need to embrace real financial independence and start living life on your own terms.

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