As an entrepreneur, franchising enables you to benefit from an existing trademark and a functioning business concept. For the franchisor, franchising is a way of expanding the business. As a franchisee, you gain admittance to an established organization by paying fees. Franchising is based on cooperation between two independent parties. You run your own company and are independent in terms of ownership.
A way of getting started
Starting a company under a franchise is a quick way of getting started. Advantages include a ready-made trademark, training programs and the ability to achieve economies of scale. The disadvantage is that your freedom of action as an entrepreneur may be somewhat curtailed. You will be obliged to follow the uniform concept. You can also expect to put in a lot of work and be firing on all cylinders right from day one.
What does it cost?
When you become a franchisee, you pay the franchisor an initial fee. The size of the fee varies according to factors such as how well known the company name is. You then pay an ongoing management service fee based on the company's or the store's sales.
Make a business plan
You should plan the start-up as if you were setting up a completely new business. This means you will benefit from making a business plan with a budget and from investigating your market.
It may also be a good idea to make a comparison between estimated income and expenditure as a franchisee and as an independent company owner. This will enable you to judge whether the business can generate the profit you want and whether the agreement is reasonable based on your expectations.
Like all company owners, a franchisee must register the company and find out about accounting, tax and insurance. The legal form for the business is normally regulated in the franchise agreement. There is often a requirement for the franchisee to start the business in a form of a legal entity, such as a limited company or partnership.