What Kind of Assistance Can A Franchisor Provide When Running A Business?
Thinking of becoming a franchisee? Here's the assistance you can expect to receive.
Starting a business can be exciting, but it also comes with responsibilities such as marketing, registration and product development. Operating a franchise has many of the benefits of running your own business without a lot of the extra stress. A franchisor can provide you with a number of things to help get the business off the ground.
This article will provide a rundown on what kind of assistance a franchisor can provide to you.
To actually become a franchisee can be a costly endeavour. Purchasing a franchise can range from $5,000 up to $1 million. This is tied to the guaranteed profit which the brand of the franchise can bring in. The more well-known a franchise brand is, the more it’s going to cost.
There are also ongoing fees franchisee’s have to pay. This can be a fixed monthly fee or a percentage of monthly turnover and are often tax deductible. This can be as high as 15%. Therefore, when starting a business and using a franchise model, it can become extremely expensive. To combat this, a franchisor may be able to provide you with a line of credit. They can also provide short loans that may be less expensive than a bank.
The reason for this is that a Franchisor has an incentive for you to succeed. However, always make sure you understand the brand you’re buying into and plan before entering a Franchise Agreement.
Franchisor business advice
Franchisor’s can provide valuable assistance when it comes to marketing and promotion of the business. A franchisor generally runs central marketing campaigns which will extend to your business. This leaves much of the marketing work out of your hands, but this comes at the cost of the franchise fee. Likewise, the franchisor can provide business advice on how to run the franchise. This can involve how to set up processes and structure internal systems. Again, this makes the process of setting up the business more manageable. Often Franchisors have a preprogrammed formula for success which Franchisees are given access to. However, it’s important to take into account that this may be not enough for you to succeed. This is because there are other factors like location and competition which can affect your business’s profitability. Regardless, there should be a disclosure statement and a purchase agreement before the franchisor provides assistance. If you are unsure of whether or not to go through with a Franchise Agreement, you can always check with a franchise lawyer.
A franchisor will normally have a central training program. This means you would either send the employees away for the company to train them, or do it in-house. If it were to take place in-house the company could give you a series of training manuals, saving the need for you to do it yourself. Franchisors may even move employees from location to location for quality control. Therefore, if you were lacking in staff, a franchisor could transfer some staff to work at your location. This is a temporary solution to a casual staffing or contract issue. Issues such as these can be easier to manage under a Franchise Agreement, but it is not guaranteed that you will receive this assistance.
Furthermore, the Franchisor usually provides equipment to the Franchisee. The cost of this is normally set out in the franchise agreement, which you may be expected to pay for some of (or all of). It is also worth checking if the franchisor covers the cost of updates and repairs for equipment. The franchisor should provide training and assistance with the actual use of the equipment as well.
It’s in the best interests of a Franchisor to play an active role in the success of its franchises. However, this support differs depending on the arrangement that’s in place. If you want to ensure that you’ll be given adequate support when operating a Franchise, make sure that this obligation is outlined in the agreement.
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Justin is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws and a Bachelor of Economics at UTS.