Is a Franchise Business Opportunity Right for You?

A Home Business Article Contributed by Donna m. Brown

Buying a Franchise is a Great Business Opportunity - but do Your Homework

A franchise can present a great business opportunity because franchises allow people to sell goods and services with instant name recognition. However, the Federal Trade Commission warns, "Like any investment, purchasing a franchise is not a guarantee of success."

There are Definite Advantages to a Franchise Business Opportunity

Carefully evaluate whether or not a franchise business opportunity is right for you before investing your hard-earned money.

An investor who participates in a franchise business opportunity is usually called a "franchisee." The investor pays a franchise fee, which can cost thousands of dollars, for the right to use a specific name and established assistance from an organized company commonly referred to as the "franchisor."

The franchisor may offer training materials and initial training, an operating manual that helps keep franchise businesses consistent. Franchisors offer management advice to help make your business opportunity successful and may even assist you in finding the right location for your business. Some franchisors offer ongoing technical support including monthly newsletters, workshops, seminars and people to offer assistance in resolving problems.

Marketing materials and often nationwide shared marketing strategies are frequently part of a franchise packet. Perhaps one of the greatest benefits to a franchise business opportunity is familiarity to the public and - if you invest in the right product or service, trust that can take years to build.

While you might reduce your investment risk by becoming associated with a franchisor, it can be costly and it can limit your control of your own company due to strict rules and operating procedures.

When you invest in a franchise you may be subject to:

- initial franchise fees and other non-refundable expenses.

- continuing royalty payments based on a percentage of your income

- advertising fees, a portion of which may go into a national fund to attract new franchise owners, a cause that may not directly benefit your business

Are you ready and willing to give up a significant amount of control while developing your business opportunity?

Uniformity is one ingredient that makes franchises so successful. The recipe for a successful franchise business opportunity calls for strict adherence to business rules of conduct and the need for home office approval to assure all franchisees are operating with in the boundaries set by the franchisor. You may be subject to:

- site approval so that well-trained management experts can help you choose a location that is most likely to make your business opportunity become a successful business (beware, the franchisor may not approve the site you want)

- design or appearance standards to ensure costumers receive the same quality experience in every location

- restrictions on goods and services offered that could stifle your creativity and ability to personalize your products and services for your own unique market

- limited sales territory in order to protect other franchisees' businesses

You Could Lose Your Business Opportunity If You Fail to Meet a Franchisor's Demands

A franchisor can end the franchise agreement if you fail to meet the performance standards established by the contract you both sign. If your franchise is terminated, you lose the investment you made and a major business opportunity. While you would never expect to breach a franchise contract, issues beyond your control could come into play. Decide how much money you can afford to loose before you buy.

While franchise agreements usually last 15 to 20 years, the franchisor could decide not to renew your contract. Additional terms and agreements could be built into the renewal. New design standards could require you to remodel your business location or revamp your business processes.

The Federal Trade Commission recommends you evaluate your abilities carefully, consider your goals and ask yourself these questions:

- How much money do you have to invest?

- How much money can you afford to lose?

- Will you purchase the franchise by yourself or with partners?

- Will you need financing and, if so, where can you obtain it?

- Do you have a favorable credit rating?

- Do you have savings or additional income to live on while starting your franchise?

For more information on selecting the franchise business opportunity that is right for you, visit the Federal Trade Commission online for "A Consumer Guide to Buying a Franchise" at .