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brandEXPANSION Hot Press

Franchise & Business Opportunity News

First Build it and then Franchise

Written on April 12th, 2007 by Joseph in Franchise Industry.

More and more business owners have recognised the benefits of first building their business before turning to franchising and selling franchise agreements that allow others to use their brands.

Many business owners have been perfecting and running their businesses for years. Experts have told them that if they turned to franchising it would definitely work and their business is definitely marketable. Yet, many business owners have decided to rather wait a few more years to make absolutely certain that what they are doing is correct and that, when bought by others, it will be successful.

Reportedly, some business owners have been thinking of franchising their business for years. Yet, many realise that franchising is not easy and that they should plan to spend at least $75,000 in legal fees and devote at least 6 months of their time.

It has been found that many business owners are waiting on purpose hoping to avoid any mistakes that could permanently harm the image of their business chain.

Of course, these business owners recognise that they are entrusting their business brand and image with someone and that person is, in effect, entrusting their livelihood with these business owners.

Reports have shown how business owners relate that once the manuals are written and the agreements drawn up, franchising really is about relationships. There needs to be that trust between the business/future franchisor and the potential buyer.

Plenty of other local entrepreneurs are weighing the pros and cons of taking the risk.

Of course, because of the high stakes, new franchisors have to be sure that they follow all legal procedures. Franchise systems are regulated by the Federal Trade Commission, and franchisors are required to file a uniform franchise operating circular with the FTC. This document, which is very thick, details everything from operational procedures to the financial backgrounds of the owners as well as contact information for current and former franchisees. In addition, there are also franchise agreements, most of which require the franchisee to pay an upfront fee, as well as annual royalties that average between 3-5% of gross sales. It is a process with many details.

Reports show that even though many realise the potential dangers of franchising as well as the amount of time, energy and money involved not to mention the legal responsibilities, they still wish to turn to franchising their business as they feel it will give them more control over the chain they have founded and it offers more franchisee support.