Choosing to explore franchise opportunities is a wise endeavor for entrepreneurs. With a franchise, you are equipped with a business model that has proven to be successful. It is an incredibly rewarding venture, both financially and personally.
requirements needed to be a franchisee
In order to bring your franchise goal to fruition, you must have certain elements in place. You must adhere to financial, legal and professional requirements instituted by the franchisor. It is important to familiarize yourself with these categories before moving forward.
Before starting your franchise journey, you must have the funds necessary to cover the costs involved. This can include all or some of the following:
- Franchise fee: Consider this the “cost of entry” for accessing all the proven business secrets. Paying this fee gets you the license to own and operate your business.
- Startup costs: Depending on the franchise, you may have to invest in a location, employees, software, insurance, equipment and supplies; just to name a few.
- Marketing fee: Owning a franchise comes with the ultimate perk: successful marketing strategies. Marketing comes at a cost, usually in the form of monthly payments to the franchisor as well as regular marketing investments beyond the marketing fee that the franchisee will have to make.
- Royalties: Monthly royalties are usually based on a percentage of your revenue. The percentage amount varies depending on the franchise.
The key here is to make sure you do your research and consider all costs before making the investment.
Franchises are governed by the Federal Trade Commission and state laws. It is mandatory that franchisors provide all legal documentation and disclosures to potential franchisees. There are two legal documents you must comb over before undertaking a franchise: the Franchise Agreement and the Franchise Disclosure Document.
The Franchise Agreement is a binding contract detailing rights and obligations for you and the franchisor.
A Franchise Disclosure Document (FDD) is guided by strict FTC rules. It includes comprehensive information about the franchisor, the business, the background of the business and numerous other vital details. You can’t legally purchase a franchise without being given an FDD.
Above all else, make sure to research the mandatory legal requirements in your state and consult with an attorney.
Owning a franchise requires that you embody the managerial skills and experience needed to run a lucrative business. Before making the leap, consider every professional quality that is required of a successful business owner. You must contribute your time, knowledge, organizational, communication, and leadership skills. If you have no interest in these responsibilities, you must appoint an administrative team or consultant immediately.