4 Tips for Purchasing a Franchise Business

Don’t rely only on brand name recognition, here’s what you need to know to before you buy


Franchising is a low-cost way to expand business operations for some established entrepreneurs, while other would-be entrepreneurs see franchising as an opportunity to work for themselves while avoiding the vulnerability that’s part of starting a venture from scratch.

The number of franchise businesses is steadily on the rise; in fact, the industry is expanding faster than the rest of the economy. Franchises are expected to add nearly 200,000 new jobs in 2014, reports the Franchise Business Outlook. The International Franchise Association counts more than 825,000 franchise establishments that support nearly 18 million jobs in the U.S. and $2.1 trillion total in revenues.

When someone buys a franchise, that person can sell goods and services that have instant name recognition; they can also access the training and support one needs to succeed as a business owner. However, when many aspiring entrepreneurs purchase a franchise as opposed to starting a business, they are not sure where or how to start, notes Christopher Conner, president of Franchise Marketing Systems, which provides full-service marketing and sales support consulting to companies across industries. Clients include Total Gym (Gravity), Blimpie, COSTCO, Allscripts, and Romeo’s Pizza.

Before one makes the jump to buy a franchise, Conner suggests you consider the following:

1. Get a good understanding of where you are financially, timeline-wise, and from an interest standpoint. You need to assess not only yourself, but your financial position. What kind of cash do you have in place, what is your liquidity, what is your net worth?

2. Know who YOU are. Before selecting a franchise brand or concept, you need to fully understand your own interests, background, and business abilities. Are your hobbies and interests outside of work or your professional life? What are your strengths and weaknesses from a business or personal standpoint?

3. Research the market and as many franchise opportunities as you can. Unless you have a specific company in mind or are using a franchise broker or consultant who is helping you through the process and researching, this could be a lengthy, frustrating process. There are dozens of franchise websites and thousands of franchise opportunities out there — there are many sites out there which provide a wide variety of information on franchises.

4. Research your financing options. Once you have made your selection, you may need financing. Even if you don’t need financing, it’s good to understand what your options are and what capital is available to you should you need working capital or resources to launch your franchised business. There are numerous options, including conventional bank loans, SBA guaranteed loans, 401(k) rollovers, alternative financing channels, and home equity loans.


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