Things Investors Should Know About Buying A Franchise

The Miami Herald:

The International Franchise Association says that investing in a franchise is a major undertaking - one that involves not only money but possible lifestyle changes. Want to avoid the sleepless nights? Here are key items you need to consider before you buy a franchised business.

1. Conduct A Thorough Investigation
Before signing a franchise agreement, know the scope and size of the industry you’re interested in as well as various franchising options that are available. There’s plenty to look into. Between 2003 and 2005, nearly 900 new concepts began franchising, according to an IFA Educational Foundation study.

Investments range from as low as $10,000 to more than $1 million, and business formats come in all shapes and sizes.

During the investigation phase, prospective investors should talk to franchise experts, consult family and friends, research companies, check finances, and read the latest research about franchising.

2. Learn The Basics Of Franchising
The IFA, founded nearly 50 years ago to promote franchising worldwide, provides a free, online course, ‘Franchising Basics,’ in addition to other resources to aid prospective investors.

The Federal Trade Commission’s Consumer Guide to Buying a Franchise is also available on the website. To help prospective investors find the franchise that best suits their interests and capabilities, the IFA offers its Franchise Opportunities Guide which allows readers to review information about IFA-member companies by investment level, category and alphabetically by name.

3, 4, 5. Money, Money, Money
Buying a franchise typically requires ample capital. The fees and expenses vary from company to company based on a variety of factors such as the area where the franchise is located, equipment needed, number of employees required and other fixed costs, initial fees and royalties.

Determine what financial assistance programs may be available. From commercial bank loans to independent financial specialists to U.S. Small Business Administration programs to direct financing, which many franchise systems offer, there are many options available.

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