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Rather than start a business from scratch some entrepreneurs take the franchise route. There are many franchises to choose from these days. The market has already been tested, pricing and marketing are all ready to go when you’re ready. You already have a customer base, all you have to do is hire employees and open the doors. Sounds great, right? In reality it’s just not that easy. There are a few things you need to take into consideration before you open a franchise.
* Personality test. Are you buying into a franchise because you don’t like following orders and want to be your own boss? If you want to decorate the place with your own ideas and run things like you want too, a franchise may not be the route to take. There are a lot of rules that you will have to follow to be part of a franchise.
* Work for the franchise. This will give you the opportunity to see first-hand how the business is run. There are some franchises will only grant a franchise to someone when has worked in their employee for 2-3 years. Working at the franchise will give you an idea if its really something you want to do.
* Research. Do yourself a big favor and research the franchise extensively. Start with the Federal Trade Commission (FTC), the American Association of Franchises and Dealers (AAFD), or the International Franchising Association (IFA). Conducting your research will help you understand the many rules that must be followed as part of a franchise. Research the positive and negative aspects of the business.
* Pros and cons. Not all franchise owner want to admit that business isn’t going well. This is why it’s a good idea that you talk to as many other franchise owner as possible. Make a list of the pros and cons for the business. Be sure to include marketing, royalties, or fees you will need to pay.
* Questions. You should ask if other owners would recommend the franchise. How long before the business showed a steady profit? Is the headquarters supportive? What was the cost of the franchise and how did they go about financing? It’s a good idea to make a list of questions as you do your research.
* Professional consultation. It’s a good idea to get the advice of a CPA, lawyer, and even an insurance agent, to look over the financial records and legalities of the business. A professional will be able to assist you with reading the fine print in the financial disclosure documents (FDD). The FDD includes all the information about litigations, bankruptcies, and the cost of opening the franchise, and franchise failures. You may want to avoid franchise consultants, it can be expensive and the faster they get you to close the deal the faster they get their share of the franchise fees.
* Financing. Check out your financing together. Make sure you borrow enough money to cover the ups and downs of starting a new franchise for at least the first 6 months and access to cover personal expenses for a year.
There is a lot of hard work, long hours and sacrifice that goes into running a business. Be honest with yourself about what you are willing to sacrifice to start and keep the business running smoothly.
For more tips contact our office at 855) 977-7623 to schedule an appointment with our advisors. At Summit CPA we offer multiple resources that will help get your business on the right track. By utilizing our Virtual CFO we have the capability to assist you virtually anywhere in the USA.
