Sun, May 19, 2024

Learning if owning a franchise is right for you

Be it a side hustle, second chapter, or primary income, owning a franchise gives individuals a chance to be their own boss.

Volunteers from the Aiken office of SCORE (Service Corps of Retired Executives) provide workshops to help interested people navigate becoming a franchisee. The most recent was March 26 in North Augusta.

The workshop was led by SCORE volunteer, Bill Reichardt, a franchising consultant since 2013.

“The main thrust of this presentation is going to be to educate you on basically what a franchise is, which some people don’t know. We’ll also talk a bit about whether you and a franchise might be a fit for each other, because that’s not always the case. And we’re going to do a little bit about how to pick the right franchise,” he explained.

According to the website www.statista.com, there were an estimated 790,500 franchise businesses in the U.S., employing 8.4 million people. That resulted in about $827 billion impact on the economy.

Reichardt said there are several advantages to becoming a franchisee, including the fact that they are federally regulated.

“Franchises have to follow laws mandated by the Federal Trade Commission. If you get a good franchise, they are interested in your success, because you will pay them royalties. And the more royalties they collect, the better they are,” he said. “They want you to succeed and help you. They know about the marketplace. If their goods are involved, they have collective buying power if you have to buy physical things. They know all about how to advertise your franchise.”

Other advantages are training programs, providing accounting systems, and ongoing research and development.

There are some disadvantages, however. Franchisees have to pay royalties to the franchisor; you have a contract to renew periodically and you have less flexibility if you want to modify or add a product to your business.

Although McDonald’s, Chick-fil-A, and other fast-food restaurants are among the best-known, and largest franchisees, other opportunities run the gamut from fitness centers, hair salons, business management, and consulting to cleaning services.

Another choice to make is whether to become a franchisee of a well-established business or go for a newer company.

“For the established ones, for certain sectors, like fast food, the name recognition is a huge factor. They’ll know all about advertising. They’ve been in the field for a long time. Their training and support are critical,” said Reichardt. “For a new franchise, it might be cutting edge, they may avoid mistakes made by others. There may be at the very, very beginning a lower cost of entry and royalties. They’re also maybe a bit more flexible on how it gets going for the first few people.”

Once a person decides which company is the best fit to jump onboard as a franchisee, Reichardt said it is critical to read the Financial Disclosure Document (FDD) which the franchisor is required to provide.

“The Franchise Disclosure Document is mandated by law, it’s something that the franchise must give you,” he advised. “It reveals a lot of information about the franchise and how they’re doing. So, we should look at that within the FDD. There will be a blank copy of a franchise agreement. So, you see what it looks like in any other legal documents.”

Learning the ins and outs of franchising is one of a broad field of topics SCORE of Greater Aiken can provide. Upcoming workshops include establishing a non-profit and the concepts of project management.

A full list is available at: www.score.org/greateraiken.

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