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FREQUENTLY ASKED QUESTIONS
What is a Franchise?
As defined by the Federal Trade Commission, a Franchise is defined as “An agreement for consideration by which a person permits the distribution of goods or services under his trademark, service mark, or trade name, during the term of which the grantor retains control over or render significant assistance to others. “ Typically, individual or group markets a company's goods or services within a certain territory or location. For this right a franchisor is usually compensated by a royalty based on the sales of the new business. Many people associate only fast food businesses with franchising. In fact, there are over 120 different types of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises, just to name a few.
What are the Advantages of Buying a Franchise?
Purchasing a franchise helps you start a new business with some distinct advantages. First, it’s highly probable that your prospective buyer has already heard the brand name or store name so you gain instant market recognition. You get the benefit of other franchise's good customer service in other areas as well as the advertising benefits of purchasing as a group. Also, franchisors generally give you marketing tips, general business guidelines, and coaching to help you get started. Purchasing a franchise business is not a guarantee of success, although the risk of failure is reduced by buying a franchise.
Should Everyone Buy a Franchise?
Franchises are not for everyone. If you want to do things your own way all the time, you may be frustrated if you buy a franchise. All franchising systems involve a network of franchisees. Every franchisee in the network will share common procedures and resources. As a franchisee, there are times where you might have to accept that what is right for other franchisees but not necessarily what you think is best for you. If you are unwilling to accept this possibility, then franchising might not be right for you.
What is Franchise Consulting?
Using a franchise consultant gives you better access and much more information than you could easily gather on your own. Reviewing all possible franchise opportunities is a daunting task. Using a franchise consultant gives you the opportunity to learn about franchising in general, the specifics of your industry of choice, and what opportunities exist and match your skills and backgrounds. Franchise consultants usually begin the process by having you fill out some forms to identify your skills, interest and your financial condition. From there, they can come up with a list of franchise opportunities that meet these goals and help you narrow down the list.
How do I Select Franchise?
Selecting the type of business franchise to invest in is something you should do with great care. You should consider what experiences you have in a particular industry, the demand for the product and the competition. You should also understand the business cycles if there is any seasonality to the business and if current economic factors are affecting the business. Part of what you are purchasing is the name recognition of the business franchise. Make sure you do some research into franchise information, including how long they've been in business, what kind of reputation they have, and whether any complaints have been filed against them. It is most important that you talk with other franchisees in that business and ask them questions about their experience in the business and how they would rate their relationship with the franchisor.
How Does a Franchise Consultant get Paid?
Typically, franchise consultants are paid by the franchisor. You can use their services to help learn about franchising and which opportunities represent a good fit for you. Franchise consultants are paid when the deal is done, so they obviously have a vested interest in the outcome of a franchise sale.
Low Cost versus Higher Cost Franchises?
Low cost franchises cover a wide range of industries and services, such as snack shops, pizza shops, cleaning services, etc. Each industry has their own general rules of thumb in terms of income potential. However, in general the lower the cost, the lower the income potential. Offsetting that is your time. Most franchises require more than a passive attitude. You need to invest your time and energy in addition to your money. You'll probably make more money off a low cost franchise that you actively manage than by putting your money in a totally passive investment. Franchises generally require a larger investment of time and money in the beginning. By the third year, you should be on your way to a nice income.
Where are the Details of a Franchise Disclosed?
The Franchise Disclosure Document (“FDD”) (which was formerly known as the Uniform Franchise Offering Circular) is a disclosure document mandated by the Federal Trade Commission (“FTC”). Franchisors are required to present this document to potential franchisees at least 14 days before they sign any binding franchise agreement. The document includes 23 specific items of information including the history of the franchise being offered, biographies of the officers and directors of the franchisor, costs to the franchisee, obligations of the franchisor and franchisee, a list of current franchisees, and much more. The FDD is not a binding agreement - it is merely intended to provide the franchisee with enough information to make an informed decision.
After you express an interest in working with Sun
Franchising, we will request that you take 15 to 20 minutes
and complete a confidential questionnaire that you will be
able to easily prepare online. WANT TO BEGIN NOW,
click here to fill out our questionnaire
online.
If you are interested in buying a franchise in Chicago, call our office at (773) 243-1603 and ask for Art Whitman, Managing Partner of Sun Franchising.
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