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Opening and Selling a Franchise

Opening and Selling a Franchise

by Thomas on June 28, 2013

Before going into the details and other important things to note of when opening and selling a franchise, it is important to know what a franchise is. A franchised business is a business wherein another independent party is given the rights to run an already existing business legally. According to the International Franchise Association, a franchise is an agreement between two parties, a franchisor and a franchisee. A franchisor is the holder of the business in focus. He/she has the rights to the business name, product, etc. On the other hand, a franchisee is the other party which intends to expand the entity and set up his/her own branch. When both parties enter into a franchise agreement, it means that the franchisor gives the authority to the franchisee to run the same business and carry the same trademark and trade name.

Just like other business endeavors, franchising has its advantages and disadvantages. Carrying a known and established business name helps a lot in growing a business. The market is already familiar with the products and services the business has. The good thing about this is the franchisee does not have to start from scratch. More so, he/she can simply focus on running the business. Another advantage of franchised businesses is the training a franchisee can receive from the franchisor. Because the franchisor’s name is also on the line, support can be expected.

When planning to open a franchise, it is important that a market scanning has been performed first. Opening a franchise is no easy thing. There are a lot of franchised businesses available in the market but not all of them are suitable for one’s personality, capabilities, financial abilities, etc. Determine which is best and suitable.

According to corporate law professional, Steven Guynn, it is a wise move to get assistance for internal tax revenue issues and to get the best protection for your corporate interests, after market scan has been completed. Legal backing can be an integral tool to your company’s continued success.

Aside from picking out the field of business one wants to pursue, knowing who the person is behind the business is crucial. Of course, a potential franchisee would have to set up a meeting with the franchisor to present his intent of franchising the latter’s business. Because a lot of transactions and discussions will happen between the two parties, it would simply be wise and practical to be-friend one’s business partner.

  • Is that person trustworthy?
  • Is he/she dependable?
  • Will he/she live up to your agreements?

These are just some of the questions one must be able to grasp to put one’s mind at ease and to be able to implement the agreement smoothly. When a relationship has been established between the two parties, the franchisee would not feel so shy to ask for statistical data, as well as support and assistance, whenever applicable. Thus, it would be a great idea to establish a genuine friendship between the other party, especially when the business being franchised is only at a national level.

Once contracts and agreements are signed and everything else has been placed, the franchisee must make it a point to adhere to the agreed way of running the business. This is not only beneficial to the franchisee but also to the image of the business. In most franchises, standards is the most important thing that has to be maintained and followed. Consumers expect the same level of service all throughout out the branches.

When selling a franchise, the aforementioned tips remain the same. Relationship with one’s franchisees is still crucial. If there is a bond between the two parties, it would be easier for the franchisor to reprimand, highlight mistakes, ask for the state of the franchised entity, etc. It would also be a lot easier to ask for royalties and other payments that are due. If one is the primary franchisor, he/she has a lot of power in his/her hands.

Getting a franchise is still a gamble, nevertheless. However, when one plays his/her cards right, things can go pretty well and successful.

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