For many aspiring Colorado business owners, buying a franchise can be a great foray into the world of business management.
Franchises offer the independence of running your own business with the support of being part of a larger organization. Although buying a franchise can sometimes be less risky than starting a business from scratch, it is by no means a sure bet.
Before purchasing a franchise, it is important to do your due diligence and to discuss the opportunity with an experienced Denver business law attorney who can help make sure you get a favorable deal.
Although every franchise deal is different, there are a few main issues that every potential franchisee should consider:
Return on investment: How much will you have to pay and how much can you expect to earn? In addition to the franchise fee, consider equipment costs and ongoing fees such as royalty fees, rent, utilities, advertising costs and any other fees detailed in the franchise agreement. Then, compare that with your expected profits. You may need to do your own research into the performance of similar franchises. The Franchise Disclosure Document should list all current and former franchisees.
Relationship with the franchisor: What kind of support will you get from your franchisor? Will you just get a set of instructions or will you have an ongoing relationship that involves training and mentoring? Will the franchisor help with employee matters? In addition to asking these questions of the franchisor, contact current and former franchisees to see what their experience has been like.
Brand perception: Do people in your community have positive associations with the brand? Does the franchisor work hard to keep its brand image in good standing? Even if you do a great job running your franchise, you could find yourself failing if the franchisor isn’t quick to respond to threats.
These are only a few of the concerns inherent in purchasing a franchise. Before you make any commitments, talk to a Denver business law attorney who can help you make the right choice.
QSR Magazine, “10 Things to Look for in a Franchise,” Scott Keller, Dec. 2011.