With growing competition in the market, many entrepreneurs prefer to follow established market leaders’ footsteps. Franchising is one such strategy where you get the brand name, the IPR rights, and the licenses to sell the products or services of an existing brand. There are over 773,603 franchise establishments in the US as of 2019-2020. Many aspiring business people in the country look for franchise opportunities in the fast-food sector.
One of the leading and lucrative US-based franchise models is Mc Donald’s. It generated around $96 billion of revenue in the year 2019. The other franchise models like KFC, Dunkin’, Subway, Burger King, Taco Bell, Denny’s, Hardee’s, etc. are among the leading franchisors.
Looking at the soaring sales and huge revenue-generating opportunity, if you wish to buy a franchise, you must know the following aspects of Franchise ownership.
Study the Market and Your Franchisor
Before you take the plunge into buying a franchise study and analyze how the market functions. Firstly, decide which business you would like to choose, and why do you wish to invest in this particular market.
Every market has its ups and downs because no business or industry is stable. The volatility of the market will always keep you on your toes. Every franchise consultant will try to convince you to invest without giving you enough time to study. But be wise and do your homework before you buy the franchise. It’s particularly important to also have an idea of what franchise marketing strategy you will use.
Research About the Franchise Fees
In the initial stages of the franchise, the franchisee is asked to pay for the promotional expenses, ongoing royalties, and other advertising fees. Franchisees must be careful in maintaining the balance between the expenditures and the revenue generation.
The franchisor also levies several restrictions on how the business must function and what further investment may require. Talk to other franchisees and consultants to figure out how much capital is needed to run a franchise.
Scrutinize the FDD Prudently
The FDD (Franchise Disclosure Document) contains all the clauses and statements on how you should be running the business model. No franchise is independent and has to operate the business according to the rules and regulations set forth by the franchisor.
The FDD describes which products you can sell, where you can sell, what should be the pricing, how often you should conduct promotional campaigns, how much investment is required, and how much liquidity should be available at hand. Ideally, these restrictions may pose disadvantages while running the business. But you’ll still have to stick to the standard procedures to buy the franchise.
Hire the Best Franchise Consultant
You may find many franchise opportunities in the US market. But if you have no idea about which one to go for, you must hire a reputable consultant. Take references from the other franchisees, talk to them, and discuss your action plan.
A good consultant will consider your budget and suggest the best franchise model. They may also help you with the franchise attorney to deal with the legalities of the FDD statement. You may also require an insurance agent to provide coverage in times of conflicts with the franchisor, and a franchise consultant will also assist you with the same.
Interesting related article: “What is a Franchise?”