Franchise purchasers should try to get the maximum possible information on the prospective franchisor’s business credentials, its litigation background and the financial dimensions of the proposed franchise investment.

Also, compile data like contact information of existing franchisees. If you have a comprehensive list of franchisee contacts with you, it becomes easier for you to get in touch with the existing franchisees. You can speak to them over the phone, and if required, meet them. You should visit as many franchisees as possible for getting a cross section of opinions and evaluations on the franchise program that you are considering. Ask the current franchisees for their honest views on the franchise program.

Try to know more about following aspects:

The value of the support and training they have received from the franchisor
The day-to-day work that is involved in the business
The profitability of their business operations
The scale of their business operations

Franchise purchasers should conduct extensive research about the investment by making an approximate accounting projection and also a break even analysis with help of a good accountant. You should seek assistance of an attorney for reviewing the franchise agreement. This will help you to know more about aspects, such as the rights granted to you, and the obligations imposed on you. Try to find out whether any portion of the contract to be signed is detrimental to your business interests. If it is not acceptable to you, try to negotiate the same with the franchisor.

Franchises and business opportunities both provide long-term investment opportunities revolving around an irresistible principle – Own a business to be your own boss. The underlying appeal of business opportunities and franchises may almost be the same, but the two arrangements are dissimilar from each other.

A business opportunity is largely a one-time purchase, generally needing a part-time effort. It usually does not demand a continual relationship with the seller. Broadly, it involves a smaller investment and no ongoing royalties. The seller in this case acts as a product-provider, albeit some guidance material is often made available with the purchase. Trademark rights are not licensed to the buyer in most cases. The seller is also not on hand for providing any tangible business assistance when things do not go right. You are largely on your own.

On other hand, franchising is the more solid and sophisticated investment. It’s a full-time, professionally absorbing business experience. The investment required can be rather substantial, but the returns are more lucrative. Renowned franchisors carry elaborate market research before they decide to sell any new outlet, so you will experience more security owing to the fact that there’s a demand for the chosen product or service. More importantly, franchisees gain from favourable economics of scale in supplies and services like advertising, buying materials and negotiating for new locations and setting lease terms.

What exactly is a franchise? How do you decide for yourself whether you are suited for one? Let’s try to find out answers to these questions to get the concept clear.

To answer in brief as to who should consider being the franchisee, the answers are very apparent. If buying out an existing business does not look like a proper choice for you, or starting right from scratch seems a bit intimidating to you, you should definitely consider the franchise ownership option.

Let’s consider various vital elements of the franchisee-franchisor business arrangement. They are as follows:

The franchisee essentially pays a franchisor some initial fee apart from ongoing royalties. In return, the former gains the benefit of a trademark along with logistical backing and expertise from the franchisor.

It largely means that the franchisee gets to make use of the franchisor’s system of running business to sell its branded products or services.

In other words, paying fees and royalties gives the franchisee the right to use intellectual property of the franchisor on basis of mutually agreed terms and conditions.

As the franchisee, you have a ready-to-use modus operandi to employ since the research has already been done for you by the franchisor who also gives you a clear idea of the impending challenges in terms of competition and an insight into how to tackle market challenges by differentiating yourself from your competitors.

Let’s look into various advantages of being a franchisee, which become even more apparent when one considers them against several difficulties faced by new and budding business persons struggling to establish themselves.

To begin with, let’s consider various constraints faced by independent entrepreneurs so that you can get a better idea of the advantages of opting to franchise. The independent entrepreneurs face following constraints:

Lack of adequate and proper market research is one of the major mistakes that independent entrepreneurs typically make owing to lack of proper guidance and direction.

In comparison to the ready expertise that is available to the franchisee, independent operators are needed to negotiate various tricky business terms on their own, and usually end up securing less attractive terms.

Some suppliers won’t agree to deal with a new business entity or will flatly reject their business since the account or business scale is too small or risky for them.

Now, we shall consider advantages of being the franchisee.

New franchisees are able to avoid many common mistakes made by start-up entrepreneurs owing to the fact that the franchisor offers the franchisee an already perfected system through trial and error.

Perhaps most significant aspect of the arrangement is that you not only get support of a well-proven business model but also training and orientation in how to utilise it.

In addition to the benefit of leveraging an established brand name, taking up a franchise provides several other advantages, which aren’t readily available to an entrepreneur looking to start a business right from scratch.