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10 Tips for Franchise Buyers
by Ed Hutchison
For individuals looking for a highly lucrative income stream, owning a franchise can be the
perfect jumpstart. Unlike creating a business from scratch, a franchise involves no guesswork,
but rather, comes complete with instructions from A-Z so new owners do not have to reinvent
the wheel. Franchises also have a success rate that far outnumbers the survival rate for
While operating a franchise can yield a far greater return than creating an independent
business, and often be up and running within a few months, there are a number of important
considerations to be aware of. Following, are 10 tips from Ken Cone www.conefranchise.com
franchise consulting expert, to help potential franchisees avoid some common pitfalls and
create a winning opportunity.
Tip #1: Choose an industry you feel passionate about. Franchises are available in 27 different
industries, including: automotive, building storage, decorating, child education and
development, coffee, computer technology, convenience stores, employment and personnel,
financial services, food and restaurant industry, health beauty, and nutrition, lodging, laundry
and dry-cleaning, maid service and cleaning, maintenance, management and training,
packaging and mailing, pet care, printing and copying, food businesses, real estate, repair and
restorations, retail sales, dry cleaning, senior care, signs and sports. The hottest trends right
now are in pet care services, including mobile pet care, and senior care agencies, with millions
of baby boomers and their aging parents on the horizon.
Tip #2: Choose a franchise that is up and coming, rather than one that has already saturated
the market. It is difficult-to-impossible to buy a popular, fast food franchise, such as a Burger
King or McDonald's, because new territories are often unavailable. However, there are
hundreds of franchises on the rise, (fitness centers being one of many examples), that
represent excellent opportunities for new franchisees.
Tip #3: Choose the right location. Most franchises use professional site selectors and
demographers to ensure that there is a large enough target market to support the franchise
being located in a particular setting.
Tip #4: Review the UFOC carefully! Once you've chosen a particular franchise to investigate,
the franchiser will send you a document called the UFOC (Uniform Franchise Offering
Circular), which will provide you with the information you need to research that franchise in
depth. Before making your final decision, review the UFOC with a lawyer or accountant.
Tip #5: Contact other franchisees within that franchise. All franchisees are required to be listed
in the UFOC, including those who have left within the past year. Be on the lookout for
unprofitable or unhappy franchisees. A few are acceptable; ten or more are not.
Tip #6: Note the amount of litigation in which the franchiser is involved. This information will be
listed in the UFOC. Excessive litigation with franchisees can be a sign of a franchiser who has
poor communication skills.
Tip #7: Meet face to face with the franchiser. Not only is it good to know who you are doing
business with, but you will also want to know what systems are put in place so that if a problem
arises you are immediately able to access the franchiser, or other franchisees, to find out how
that issue has been dealt with before.
Tip #8: Inspect the procedure manual and observe how well-organized the franchise is. The
franchise should be organized so that the procedures that are supposed to be followed can be
followed. If the franchise is not well-organized, and the procedures are not easy to follow, the
risk of failure increases.
Tip #9: Royalties should be priced at a rate that allows both parties to thrive. The intent of
being a franchiser is to receive passive income from the efforts of others. The royalty rate
depends upon the industry. Royalties for food-related franchises are lower because of the
higher overhead costs. For example, franchisees at McDonald's pay a 4% royalty to the
McDonald's franchiser. For franchises that are based on service providing, where the overhead
is low, such as for maid services or the computer service industry, the royalties are higher, at
10% or larger.
Tip #10: Talk with a franchise consultant before jumping into the franchise world. There are
many risks that franchise consultants can help a potential franchisee avoid. The consultant's
job is to save franchisees time, money and potential aggravation. The cost of buying a
franchise should not increase when you use a franchise consultant, and franchise consultants
should provide their services free of charge.
Ed Hutchison is CEO and President of the North American Boxing Council (NABC.net). He
works with pro athletes, trainers & managers at all levels. He writes daily on his personal
website http://www.winrz.com - Winrz.com Home Page for Winners about self help, leadership
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