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Thinking About A New Franchise Business

  Sanjiv Gupta CPA  Published 
Thinking About A New Franchise Business

Investing in a business is the fastest way of building a name for oneself in the market however, it is not easy to establish a credible name single-handedly. Almost everyone dreams of acquiring a reputable and successful business for themselves but nothing happens while one just sits and dreams. Every dream needs a proper outpour into constructive actions, which determine the conversion of that dream into reality. However, hard work is the catch in this story of success. People dream but their incentive to do hard work to acquire what they desire is weak and as a result, their dreams never get converted into real-life phenomena.

You must always be aware that there is a definite downside of starting your own business. If your attempt at establishing proper business crashes, the loss experienced may be far greater than the initial investments. This may end up leaving the person in question in a state of critical bankruptcy. Therefore, the field of business is highlighted to be the best opportunity for people with a background in business or a mindset that comprehends the complexities that are associated with this field. The rest of the dreamers may not be blessed with the attributes that are required for the successful establishment of a business which can, in turn, lead them into an economic pitfall.

Taking risks is a fundamental rule in the field of business. It is a sort of gambling where people fail and succeed every day. The odds may favor them one day or be against them the next. It is all a matter of destiny combined with experience and wisdom. There are several ways to kick-start a business.  The safest method to achieve a successful career in business and the concrete establishment of your name at the forefront of a business empire is to utilize opportunities offered by a franchise business, rather than attempting to build your own brand up from scratch.

Franchise businesses provide you with a complete guidance protocol that is essential for beginners.  Through acquiring the chain of a particular brand name, you can work on establishing, as well as management skills while learning the perks of the whole system in the process. You will also be dealing with the experts and gaining valuable experience in the field.

Franchise businesses are fundamentally businesses that have been handed over to entrepreneurs for marketing and management in a particular region or area. The owner passes over the legal temporary power to the entrepreneur that he chooses to make a deal with. The owner does this for a price and lets the entrepreneur use his brand name for establishing a business in the region. Of course, the owner is the one making more money than the entrepreneur in this case but as a starting practice for fresh entrepreneurs, this is the safest and wisest deal of all.

There are two fundamental types of franchising businesses, one of which is product/trade name franchising, while the other one is business format franchising. In product/trade name franchising, as explained above, the owner passes the legal rights of the company to an entrepreneur. The entrepreneur then begins to establish a business in a region using the name of his brand for a price. In business format franchising the owner, also known as the franchiser, helps the franchisee (the entrepreneur) in acquiring the multiple, vital details that are required to set up a business.

The franchising business comes with its share of risks as well. Numerous businesses have been announced as fraudulent after entrepreneurs took a risk and invested in a fake brand name without investigating the background of the possible franchiser. A complete and detailed investigation into the background and legal aspects of the franchiser is always necessary. The entrepreneur must also conduct a background check on his company setup, as well as the business assets that he boasts of having. Fraud is very common in this field and it manifests itself in a variety of ways, so if one is not careful he or she may end up on the wrong side of the bank which can potentially end up in lifelong bankruptcy.

Identifying one’s strength is the key to success in a world of franchise businesses. The major factor one needs to focus on while contemplating an offer is how much is he or she willing to risk in investment. Next, the entrepreneur must be aware of his or her goals and aims which would lead the business to a destination and lastly, the entrepreneur must know what his or her strengths and weaknesses are.

With the knowledge of one’s potential strengths, abilities, and drawbacks, it is easier to devise a strategy that would prove beneficial for a potential entrepreneur in the field of franchising businesses. Four ways to go about dealing with a potential offer before taking it, for a maximum success rate are:

  1. Utilize the professional help of an attorney and a CPA whose job is to provide you with the legal merits and aspects of a potential deal. Their professional expertise would enable you to visualize the smaller fine print, which would eventually grow to form potential problems for you in the business. With proper guidance and identification, those small obstacles can be obliterated.
  2. Identification of potential money and reputation deteriorating problems before making the deal is essential if one desires to avoid filing bankruptcy in the near future. A perfect and detailed investigation is the key to avoid such dilemmas.
  3. The knowledge of the history of the company as well as complete training in the art of franchising the particular product the franchiser entrusts you with is also essential, as well as beneficial.
  4. Acquiring the legal and financial history of the brand-name that one has been offered to the franchise is also one of the most important protocols one should follow up before signing a legal contract of acceptance. It is not easy to set up a business without a few smart moves but franchising is comparatively less risky than other businesses.