4 Frequently Asked Questions About Joining a Franchise
Franchised businesses have a somewhat unique business structure, but there are a number of benefits to joining a franchise brand if you want to become a business owner. When joining a franchise, you can provide product sales or services, while also enjoying the instant recognizability of an established brand. Many franchises provide training and support to help their franchisees run their business and to set them up for success—but success is also not a guarantee simply because you purchased a franchise. Keep reading to learn more about franchised businesses and what you need to know before opening one.
1. What is the Franchise Business Model?
Franchises aren’t quite a corporation with multiple locations, but they also aren’t small, independent businesses. Most franchises fall somewhere in the middle, where independent franchisees are responsible for their location’s operation, but they must work under the guidelines set by the franchisor and pay the franchisor fees and royalties as determined by the franchise agreement.
Some of these costs may include:
- Initial franchise fee
- Royalty payments
- Advertising fees
Some of the franchise guidelines can include:
- Business location
- Design and appearance standards
- Goods and services offered
- Methods of Operation
- Sales area and competition
Because franchises rely on a contract between the franchisor and franchisee, you can also count on needing to comply with the contract in order to remain a part of the brand. It is also necessary to renew your agreement at the end of your agreement period.
2. How Do I Find the Right Opportunity?
Choosing the right franchise is a personal decision. It often helps if you have industry experience, but it’s not necessary. If you knew you were interested in providing grooming services, or perhaps that you wanted to find a franchise whose clientele was looking for a specific experience that you wanted to offer, you might begin looking at lifestyle club brands like The Gents Place.
There are a variety of resources to help you find the best franchise for your new business. We recommend the following resources:
- Visiting potential franchise outlets. This can give you a chance to experience the brand firsthand, as well as talk to the franchisee and ask them about their business and the brand.
- Reading a franchise handbook. This resource can provide a lot of information regarding what franchises are operating in which industries. It is an excellent point to jump off from and discover the brands in the industry you prefer.
- Attending a franchise exposition. A franchise exposition is excellent for those who are ready to gather a lot of information and begin comparing franchises. It often helps to begin your research before the exposition, so you know which franchises to target and avoid feeling overwhelmed.
3. What Do I Consider When Choosing a Franchise?
There is a lot to consider! This is a big investment, so it’s important to understand all the details before you agree to join the team. If you have narrowed down your selections to a few likely candidates, it’s time for some more rigorous screening. Here are some factors to explore when making your choice:
- Demand. Is there a demand in your area for the services or products offered by a franchise? Will this franchise bring year-round business and repeat customers, or is it a single-use or seasonal business in your community? Will you need to take the brunt of advertising, or will the brand’s name be recognized and make the job easier?
- Competition. How much competition will you have at the local, regional, and national levels? Are there company-owned or franchised outlets in your area? Are your services or goods easily available online or through a catalog? Will you have to face competing companies or franchises that are similar in nature and prices to yours? If so, how well-known are these businesses?
- Name recognition. Names are powerful, and joining a franchise with the recognition and trusted reputation to draw in customers can greatly help your business in the long run. Find out how long the franchisor has been in business, how much growth they’ve seen, and whether consumers have much brand recognition for this particular franchise. You also may want to learn about their reputation and if they have a federally registered trademark.
- Complaints. Have you ever bought something, and then read the reviews to find that the majority are negative? You can avoid that with your business by reviewing the company’s Better Business Bureau rating, reading their social media and review site profiles, and learning whether the franchisor or brand has been the source of complaints among consumers and other franchisees.
- Support services and training. Ongoing training and support are invaluable as a business owner, and it frequently is a benefit of joining a franchise. Ask what kind of support and training you can expect to receive, as well as what current franchisees have to say about the quality of the training and support. You may want to compare the training with other franchises and explore what kinds of background, experience, and education other franchisees have.
- Franchisor experience. Newer franchises can be exciting, but a tried-and-true franchise offers more stability. What’s important is that you feel comfortable with the franchisor and their abilities to head the franchise and support you.
- Growth. A company that grows quickly without the infrastructure in place may leave franchisees without adequate support. Growth is good, but the way the company approaches growth is of equal, if not greater, importance.
4. What is the Franchise Disclosure Document?
The Franchise Disclosure Document (FDD) is the legal document that covers all the details you need to know when joining a specific franchise. This document must be given to you at least 14 days before you are expected to sign a contract or pay any fees to the franchisor or affiliates. It is important to read through the entire document and note down any questions you may have.
The items included in the FDD are:
- Item 1: Franchisor’s Background. The franchise’s history, competitions, and unique legal requirements.
- Item 2: Business Background. The executives of the business and their experience.
- Item 3: Litigation History. The litigation history of the franchisor and executives, both against and by these parties.
- Item 4: Bankruptcy. If the franchisor or any predecessor, affiliates, or executives have been involved in a recent bankruptcy
- Items 5-7: Initial & Ongoing Costs. These items will cover the costs of starting and operating a franchise with this brand, though there may be other expenses not included.
- Items 8 & 12: Supplier, Territory & Customer Restrictions. These items include any limits imposed by the franchisor on suppliers, franchisor/franchisee territory rights, and other restrictions on the operation of your business.
- Item 9: Franchisee’s Obligations. A reference table to help you navigate the document and find your obligations.
- Item 10: Financing. The terms and conditions of any financing offered by the franchisor.
- Item 11: Training & Support. This item outlines what services the franchisor is obligated to provide to franchisees.
- Item 13: Trademarks: Information about the franchisor’s trademarks, service names, and trade names.
- Item 14: Patents & Copyrights. An explanation of how the franchisee may use the franchisor’s patented or copyrighted materials.
- Item 15: Obligation to operate the business. If you are obligated to participate in the day-to-day operation of the business, it will be noted in this item.
- Item 16:Restrictions on offered goods or services. If the franchisor has placed restrictions on what goods or services may be offered by a franchise, they will be outlined here.
- Item 17: Renewal, termination, transfer & dispute resolution: This item will discuss whether your franchise can be renewed or terminated, and under what circumstances, as well as your rights and restrictions in disagreements with the franchisor.
- Item 18: Public figures. If the franchise uses a public figure to represent the brand, the amount they are compensated must be revealed in this section.
- Item 19: Financial performance representations. In this section, the franchisor may provide additional information about the financial performance expected of a unit.
- Item 20: Outlets & franchisee information. This section details the other locations and contact information of other franchises.
- Item 21: Financial statements. Audited financial statements from the past 3 years must be included here.
- Item 22: Contracts. This section will contain all the contracts you will be required to sign in order to become a franchisee.
- Item 23: Receipts. The final item in the FDD is a receipt which you will need to sign in order to verify that you received a copy of the FDD for review before being asked to sign any contracts.
Interested in beginning your own fine men’s grooming franchise? At The Gents Place, we are seeking qualified applicants to become our Strategic-Partners. Check out our process for applying to become a franchisee with our team to learn more.
Questions? Contact our team at The Gents Place today!