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Articles On Small Business Opportunities And Buying Franchises
Guide To Buying A Franchise
If you have decided to buy franchise is something worth investigating how do you evaluate what is available? It really is not a difficult task, but it is one that takes a lot of effort. With franchises you usually have a lot of information available to you, sometimes too much!
Items you may want to look at include:
A written description of the business and its market.
A written resume for each of the officers and key management employees of the franchisor.
Financial statements for the franchise company and all of its affiliated companies, in audited form, for at least three years.
A copy of all documents you will be required to sign, as well as all documents to which you will be subject.
Some questions you should also be asking are:
What, precisely, is the business that your are being offered? Can you state in one or two sentences what makes it different, and hopefully better than other franchises like it? Is there already name recognition in the marketplace for the company? Or will you have to build it yourself in your own town? If so, what budget is the franchisor going to commit to your local market? Is the demand for the product or service good both in economic ups and downs? Is the product or service priced competitively? Who are the target customers? How many are needed in a single store's market area to make that store or service profitable? What about new competitive industries or businesses coming to town? What insurance will the business need? Can the franchisor (or franchise association) get it for you at lower group rates? Precisely what can the franchisor do for you that you can't do for yourself?
These are all points that must be answered about the specific franchise you are thinking of purchasing.
Questions about the franchisor should include:
Is the company financially sound? Are there any state or government imposed escrows or franchise fees or administrative orders outstanding against the company? The answer may be a tip-off to problems.
Are there any hidden costs in your franchise? These often appear as special items in the financial statement of the company.
What portion of the annual fees go to national and local advertising budgets? Many will commit to a stated percentage in writing up front.
Is the franchisor connected formally or informally with another organization offering similar or related products? What protections to you have against that organization competing with you?
Small Business Opportunity Buying Guide
Many buyers do themselves a disservice by looking at all business opportunities that "might be interesting"; instead know what you're after. Targeting is probably the key word for the person or company looking to buy an opportunity. Targeting makes your search more efficient and more likely to succeed. It is the most important thing you can do in the business opportunity buying process.
Below are some considerations to make when selecting an industry, and ultimately the business you decide to buy. Look at all these factors:
Your business experience.
Your training.
Your ability to concentrate on a project without getting distracted.
Areas of work you enjoy.
Your business skills.
Your ability to accurately pick out trends in certain industries.
Tasks you most dislike in your present job.
Your standards for product quality, service, and price.
Your ability to manage others.
Your physical and emotional energy needs for industries in which you have an interest.
Your hobbies, particularly those with commercial prospects.
The amount of time you are willing to devote to your business
Your recurring daydreams and the likes, skills, and opportunities they hint at.
What skills you'll need to hire to complement your own.
Other factors to consider are:
Where is the business located? Is there a long term lease? Why is the business located where it is? Most businesses are movable, many at a low cost. Don't initially get hung up on the idea that a business might not be located where you would want to live. Many are movable. Then again, a long term favorable lease might more than outweigh the savings from moving the business closer to its suppliers or customers. What are the weaknesses in the management team? There is no such thing as a business opportunity without weaknesses. If the owner will not admit to any weaknesses, he might be unrealistic in other aspects about the business also.
Also ask yourself if the profit level is high enough to pay your teams salaries and give a good return on your investment. Remember salaries are not part of your return on investment unless you like working for nothing. Many business buyers miss this point when buying a business opportunity because of its simplicity. Buying a business opportunity is an expensive alternative to securing a job.
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