Franchise Articles - Succeed as a Franchisee

10 Steps To Owning A Franchise.

By: Jessica Miller - Staff Writer for RedHotFranchises.com

 

1. Begin Your Search   Searching for that perfect franchise takes time and patience. You can't just look for the hottest opportunity that claims to make you a lot of money. Your decision should be based on something you already love to do such as a hobby or interest. 
2. Submit the Franchise Application   The franchisor will require that you submit a franchise application to commence the franchising process. The purpose of the application is for the franchisor to gather enough information to create a profile on your suitability as a franchisee. Fill in as many sections as possible and be honest when answering the questions.
3.  Meet With The Franchisor   This meeting is to further discuss your application and for the representative to provide you with more details about the opportunity. Here is your opportunity to ask important questions: 
4. Obtain the UFOC and Franchise Agreement 

• The UFOC is the first document you will review as a prospect franchisee and outlines the extent of corporate disclosure that the Franchisor must provide you with at least 10 business days prior to the signing of the Franchise Agreement. This “disclosure statement” includes such items as the Franchisor’s obligations, the Franchisees obligations, territory boundaries, and initial and ongoing fees to be paid. There are a total of 23 categories of information in the UFOC.

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  The Franchise Agreement  contain between 20-30+ parts, each containing the relevant sections and sub-sections that govern the terms, conditions, rules, restrictions, covenants, and other legal terms binding you to the franchise opportunity. At first glance, the agreement will be overwhelming and not easy to read or understand; hence, the need for a franchise lawyer.

5. Create a Check List 

• Hire a lawyer and an accountant.
• Ask questions to understand all disclosures, franchise agreements, and other legal documents. Do not leave this up to your lawyer, as it is very important for you to have an intimate knowledge of this information.
• Verify everything a franchise sales person says by asking for it in writing. Believe it or not, some sales people tend to exaggerate the truth from time to time.
• Analyze your market and make sure there is a need for your product.
• Contact both current and previous franchisees and ask them for both the positives and negatives associated with owning a franchise. Ask the franchise company for statistics relating to success rates.
• Make sure you are appropriately funded. A lack of capital could turn all of your early expenditures into a complete waste.
• Meet the key management figures of each franchise company. This is especially important for smaller franchise companies. Do everything you can to get to know both the company's executives and their field representatives.   

6. Financing... Franchise financing can be a frustrating process without knowing your options. Apart from your local bank, these options fall under 3 main categories:
   
   1. SBA Financing
   The U.S. Small Business Administration (SBA) guarantees loans for private banks/lenders. Programs include the popular 7(a) loan for up to $100,000.
   
   2. Non-SBA and Specialty Financing
   There are commercial lenders that specialize in franchise financing through equipment leases and structured term loans. There is also the ERSOP program, using your 401k or IRA as start-up capital without penalties, taxes or distributions.
   
   3. The Franchisor
   Many franchise companies either offer financial assistance themselves or help franchisees find a bank or other lender. Most have a lists of "preferred lenders".
   
   4.Personal Assets
   Whether it's SBA or non-SBA financing, anywhere from %15 to 30% of the total capital need can be required of the borrower. Franchise start-up costs vary wildly across franchises, so this could be anywhere from $20,000 to $200,000. A borrower may need to refi their personal propery or liquidate stocks, bonds, IRAs, 401k, etc.   

7. Negotiate The Terms of The Franchise Agreement Any individual who signs a franchise agreement is executing a legal contract, that requires certain obligations be fulfilled and particular responsibilities met. Although most individuals execute the franchise agreement in the name of a corporation, franchisors typically require a personal guaranty by the shareholders of that corporation. This prevents the owners of the franchisee entity from avoiding personal liability to the franchisor for certain obligations that could arise especially in the case of termination for cause.  Before you sign the franchise agreement you need to be comfortable with all of its provisions. In order to achieve this comfort level you and your attorney may feel it necessary for the franchisor to make changes to the franchise agreement. 

8. Prepare for Opening Day   Depending on the franchise system, it can take several months before your franchise is ready to be turned over to you. During this time, you will be preoccupied with your training program, meeting other franchisees, franchise site selection, setting up your business framework, and developing an abundance of skills to prepare your for franchise life.

9. What to Expect Once Your Open For Business   Many franchisees have claimed that franchising has allowed them lifestyle flexibilities that conventional employment cannot offer. The number one lifestyle perk continues to be the opportunity to spend more time with family, followed by an enhanced income. Franchisees have felt a greater sense of pride, financial accomplishment, and personal success as members of a successful franchise concept.

10. How to Insure Success  No matter how you look at it, a franchise is still a small business. To succeed, you must bring to the table the essentials sales and marketing, management, and leadership skills required to succeed as a business owner. These won't come with your franchise starter kit so before you sign on the dotted line, make sure to have your entrepreneurial bases covered.

Here are some RED HOT TIPS FOR SUCCESS:

• PLAN AHEAD
• ORGANIZE
• TRAIN YOUR EMPLOYEES
• DELEGATE RESPONSIBILITY
• SUPERVISE, DONT CONTROL
• SET AND ACHIEVE GOALS
• ALWAYS MAINTAIN A POSITVE WINNING ATTITUDE

YOUR ON YOUR WAY TO OWNING YOUR OWN RED HOT FRANCHISE