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September/October 2019

Finding the Right Franchise

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For many people, starting a franchised business is the quickest way to launch a company. The best franchises provide all sorts of support and may provide access to financial and other products you need at a reduced cost. But you can also find unexpected challenges, including franchise rules that control how you run your business. Here’s how to find a happy medium:

Eyes Open
Buying a franchise can be rewarding. Many franchises offer extensive training and, most importantly, brand recognition, giving your franchise a leg up on competitors who don’t enjoy the same brand awareness. But buying a franchise isn’t for everyone. A successful franchise will typically have an established way of doing things, and you generally won’t have the freedom to stray from its approach.

This means potentially paying a percentage of income or sales as royalties and contributing to franchise-wide initiatives such as advertising. Standard dress, presentation and even bookkeeping may also be mandatory. A contract will state these and other stipulations, and the franchisor may terminate or opt not to renew your contract for any number of reasons.

Reputable franchises will require that your business has general liability, product liability, worker’s compensation and unemployment insurance. They may also require insurance to cover business interruption, employment practices and vehicle use. Typically, franchisees have access to lower rates on these protections. Sometimes, a franchisor will contractually state it be named as an additional insured on some policies.

If employee benefits are not offered through your franchisor you may want to work with a financial professional, especially if you want to offer health insurance, life insurance and a retirement plan. Often, you can find these benefits at a reduced price through a group insurer.

Plan Ahead
If you are considering buying a franchise, thoroughly research it. Look for claims, scour social media for comments on it and run the numbers to make sure you can handle the financial commitment. The latter is crucial because even the best franchises take time to earn back initial investments.

Most importantly, talk to legal, accounting and financial professionals who are experienced dealing with franchise issues. The work you do up front can save you grief later.


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