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A franchise is by no means a guarantee of success. Plus,
a new franchise is basically a start up with some advantages. Master
Franchisers will do a load of demographic and marketing studies
evaluating potential customer base, drive-by traffic, etc., but the only
thing that they cannot do is guarantee your success.
The Best Investment You Will Ever Make
When buying a business, you can and should expect to make at least 25%-33% return on your cash investment. Plus, you will have the opportunity to produce a steady personal cash flow, and you'll be building value that will pay you handsomely when the day arrives to sell the business.
Many people wrongly believe that acquiring a
business is a risky investment. Personally, I think that putting your
fate in someone else's hands has a heck of a lot more risk to it. While
there is some inherent risk buying a business, much, if not all, can be
eliminated simply by doing your research beforehand on any business you
consider purchasing.
Franchises can be a good place to begin your entrepreneurial career. If you want to greatly improve your chances of success then buy a franchise resale. Take advantage of one that's already established and successful. This way, you combine the best of both worlds: a franchise concept and the track record of an existing business. It just makes more sense.
While it is not always easy to locate resales,
there are plenty of them around. The best way to find one is to address
your search on two levels: call the Master Franchisers and ask if they
can provide you with a resale listing in your area. Second, approach any
current owner and ask him/her if they know of any that may be for sale.
They will probably tell you that theirs is for sale "for the right"
price. In either case, you will get leads to pursue. Of course, you can
always go through regular channels such as your local paper, business
consultants and online listings.
The other good part of buying an existing
franchise is that you can implement all of the same strategies for
identifying, negotiating and financing the purchase as you would when
buying an existing non-franchised business. As such, it's wise for you
to get hold of a good strategy guide for buying an existing business.
Probably the most attractive feature of buying a franchise from the buyer's point of view is that you can investigate any franchise much easier than an existing non-franchised business. The reason for this is because you will be able to look at other franchises under the same banner. You can speak with other franchisees in your area and they will be a wealth of information for you.
There is also a disadvantage when investigating and conducting Due Diligence on a franchise as you have to do it on two fronts. You have to check out the business itself, of course, but of equal or greater importance you have to evaluate the Master Franchiser to be sure that they will deliver everything they are supposed to do.
The Master Franchiser's agenda is to open up as many locations as possible. While they may all say that they will not dilute the market, rest assured that unless they are contractually obligated to do otherwise they will keep compacting the territory. As they open more and more locations you may wind up competing with your own brand. Once a customer of yours finds another location to be more convenient - unless you have a rock solid relationship with that individual - you will lose their business.
The best way to accumulate wealth in franchising is to keep opening up or buying other locations. If you can, stick with one banner or within an affiliated group of companies. This way, your leverage with the Master Franchiser increases and you can also focus on running one particular type of business. Open up new locations too quickly can cause growth problems. However, as soon as you get the first one on track, look to acquire another one.
In Summary
Franchises can be ideal for many people. If you want to really improve your success rate, then buy an existing location. It will provide you with all of the benefits of a franchise along with the added security of historical data and a proven track record.
The Investigation Advantage With A Franchise
Probably the most attractive feature of buying a franchise from the buyer's point of view is that you can investigate any franchise much easier than an existing non-franchised business. The reason for this is because you will be able to look at other franchises under the same banner. You can speak with other franchisees in your area and they will be a wealth of information for you.
There is also a disadvantage when investigating and conducting Due Diligence on a franchise as you have to do it on two fronts. You have to check out the business itself, of course, but of equal or greater importance you have to evaluate the Master Franchiser to be sure that they will deliver everything they are supposed to do.
Your Partner is Your Competitor
The Master Franchiser's agenda is to open up as many locations as possible. While they may all say that they will not dilute the market, rest assured that unless they are contractually obligated to do otherwise they will keep compacting the territory. As they open more and more locations you may wind up competing with your own brand. Once a customer of yours finds another location to be more convenient - unless you have a rock solid relationship with that individual - you will lose their business.
How to Make Money in Franchising
The best way to accumulate wealth in franchising is to keep opening up or buying other locations. If you can, stick with one banner or within an affiliated group of companies. This way, your leverage with the Master Franchiser increases and you can also focus on running one particular type of business. Open up new locations too quickly can cause growth problems. However, as soon as you get the first one on track, look to acquire another one.
Franchises can be ideal for many people. If you want to really improve your success rate, then buy an existing location. It will provide you with all of the benefits of a franchise along with the added security of historical data and a proven track record.
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