So you are over 50, tired of your job and are looking to become an entrepreneur to avoid the eight to five job. You would like to start a business but have no special skills or products in mind. What do you do? You might consider a franchise. But which one? These are the things to consider:
- The Basics – How does a franchise work?
- What do you need to know about purchasing a franchise?
- If you have a hobby or business, should you franchise it?
For Franchisees, franchisors can provide an opportunity for franchisees to own and operate a business with a proven business concept. In addition, they are provided with training and support plus they already have a brand already established.
The basics are fairly simple. The franchisor grants someone permission to trade under the franchisor’s trademark. Typically, you are looking at an established franchisor who already has a proven concept with a proven track record, training and operating methods. They then train the franchisee how to replicate what is already a proven concept and although the franchisee is independent they operate under fairly strict controls.
In return for a turn key business the franchisee pays the franchisor an upfront fee anywhere from $5,000 to over
$250,000 or more for the right to a particular area. In addition, the franchisee often pays for lease space and equipment to set up the business. After that, there is usually a royalty anywhere from 5% to 11% based on monthly revenues. There also may be contributions required for a central marketing fund operated by the franchisor.
Survival rates for franchise businesses are much higher than for independent businesses but you need to do your homework. Remember franchisors are “selling” their business plan. It is there job to convince you they have a no lose opportunity.
But remember the old adage, “if it sounds too good to be true…”. So check on some things before signing the dotted line. Check out the numbers presented to you with, A. Your accountant, and B. talk to other franchisees. Research your own market place. What works in Boston may not work in Idaho. Is there a demand for your product or service and what is the competition in your area? Do you and your staff have the management skills to handle this particular business? Probably most important, do you like the business on which you are about to spend your retirement or life savings?
Remember, because you see a lot of McDonald’s franchises all over the world, does not guarantee you would be a successful franchise owner. You still need to do the homework before entering the franchise and the work after purchasing the franchise. A franchise gives you a little better opportunity at success, but the small business failure rate is still around 80% in the first three years. There are no guarantees. Remember to look before you leap.
By Jerry Mohr for the 50 Plus Report