By Linda Tancs
Franchising is a growth industry, accounting for $1 trillion in annual retail sales in the U.S. alone. A franchised business is one that operates under a marketing formula common to all franchisees, including a trademark or service mark. But that’s about where the similarity ends. Not all franchises are created equal. So how much do you know about evaluating, setting up, financing and operating your own franchise? Read on for some suggestions:
1. The first thing you need to do is to choose the right franchise. Once you have a general idea of the right kind of franchise for you, be aware of the purchase costs involved. Maybe a low-cost franchise is the best option. Whatever the case, investigate the industries that match your budget and interests by looking at franchise opportunity listings.
2. The next thing you need to do is determine the structure of the business you’d like to start—namely, a sole proprietorship, partnership, corporation or limited liability company. You might even decide to set up an international franchise.
3. Once you’ve determined the kind of franchise you’d like to operate and set up the best structure for your business, you’ll need to figure out how to cover your operating expenses. In most cases, you’ll need to finance your business to some extent through bank or SBA loans. A more established franchisee might be looking to boost business with trade credit or factoring arrangements.
4. You’ve selected your franchise, formed a business, and set up financing. Now it’s time to master the nuts and bolts of running a business. For example, your franchisor may assist you in negotiating the best lease for your business or renewing an existing lease. Your franchisor may also help you find employees. Or maybe you’ll need to find a second-in-command to give you some breathing room. Another important issue to consider is business insurance.
Operating a franchise is a great way to enjoy the benefits of business ownership under a unique system developed by the franchisor. The success of your venture is likely to rest on how well you collaborate with the franchisor to promote and protect its method of doing business.