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Is buying a franchise the right business investment?

Many dream of one day owning their own shop, but starting from scratch can be daunting. One alternative to building a business from the ground up is to buy a franchise. The starting costs will be much higher, but the franchisee also gets established products or services as well as guidance for running a successful business.

Before signing on the dotted line, business experts recommend researching your business opportunity to make sure it is a good fit for the franchisee and whether the franchiser's deal is fair and equitable.

Important questions to answer

There will be a certain amount of soul searching by the potential franchisee to ensure that they are committed to the hours and effort involved as well as the stress of being boss. It is also wise to do some research on the franchise. Questions to ask include:

Is there brand recognition?

Strong brand recognition or an emergent buzz in other territories can make it easier to establish a new business.

Is there competition?

This could be at the local, regional or national level and could come from the franchise company selling products online, potentially undercutting the new business’s market share.

Is there a demand for the product?

Perhaps the goods or services of this new widget will revolutionize the widget industry, and customers are clamoring for it.

What is the franchiser’s reputation as a partner?

Check with the Better Business Bureau or other franchisees to see if the company is good to work with and fair in their business agreements.

Is there support and training?

These businesses do not run themselves from the get-go. The right franchiser provides useful information and necessary tools for running a successful franchise.

Legal guidance often necessary

It is smart to consult with a business law attorney any time there is a deal that involves significant amounts of money, financial agreements and a contract. These legal professionals can protect the client and help them to avoid any unnecessary risk, such as reviewing the franchiser's Franchise Disclosure Document to make sure those numbers add up and are applicable to your market.

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