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The basics of Buying a Franchise

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by Startacus Admin

franchisingHere at Startacus we know all too well that setting up a business for yourself can be a daunting, stressful and at times downright frustrating process, that’s just the way it is!

For many it's the anticipation of all these factors along with the financial risk involved that keeps them from taking that mighty step and making their dream of self employment a reality. But a crafty few choose to offset some of the risk and fear by buying into a franchise.

That's not to say that setting up a franchise will be a total cake-walk... you will still need a significant amount of money to invest and lots of hard work to get you there, but you might (just might) find it a little easier than going it alone...maybe!

So what exactly is a franchise business and what are the potential benefits and drawbacks of buying into one? Hopefully this quick Startacus summary will help you decide if it's the right choice for you...

What is a franchise?

If you research the term online you will probably end up more confused than when you started. Simply put a franchise is the permission franchisinggiven to an individual or group allowing them to market an existing company’s goods or services. Its a system that has been around since the 1850's and today there are hundreds of types of franchise businesses ranging from fast food restaurants to automotive repair so you're sure to find something that fits in with your own skills and interests.

How does the partnership work?

Its simply not possible to give specific details because, as you can imagine each company operates with its own rulebook, but let's stick with an obvious example and assume that you want to open up a coffee shop franchise.

Generally (though not always) a franchise agreement will run for a set period of time, perhaps 20 years and your initial fee, which may be in excess of £150,000, will provide you with all the training and equipment you will need to get the businesses running. There will also be ongoing fees to be paid which may include a percentage of your sales to go towards rent(if you location is franchise owned), service fees and a contribution to national marketing.

How do you set one up?

There’s lots to choose from so firstly you need to decide what kind of business you want to run and what companies offer franchise opportunities. Your first port of call should be the internet where each company will detail their franchise options and availability, be sure to shop around to find the one that’s right. Next you will need to schedule a meeting with a franchise representative during which you will be given the opportunity to discuss your proposed venture, find out how much it will cost and see what help and support the franchisers will offer you.

If you don't have the funds to invest directly yourself, never fear as compiling a detailed business plan at this point will allow potential investors (such as a bank) to see that you have a potentially profitable idea. Once you are sure that you can meet all the requirements set out by the franchiser you are ready to sign a contract with them- but make doubly sure that you have no outstanding issues before you put pen to paper!

At this point most franchisors will offer you all of the training you will need to successfully run your business and ensure that you fully understand their business strategy. You also need to start scouting for potential locations to rent or but for your franchise, making sure that you stick to any guidelines laid down by your parent company (unless of course your franchiser provides the location in which case happy days!). Once the location has been secured you can set about ordering equipment, furnishings and hiring employees.

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Published on: 16th September 2013

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