Individuals who yearn for the freedom to be their own boss, but don’t have the time to experience the growing pains of a new business may want to consider a franchise. The time it takes to open a franchise business is much quicker than the time it can take to successfully launch a new business from the ground up. For example, it only takes Two-four months to open a 1000 Degrees Neapolitan Pizza franchise.
Franchising’s greatest strength is the ability to bring independent retailers together using a single trademark and business concept including, brand awareness, pooled advertising, group purchasing and uniformity in meeting customer expectations, according to Entrepreneur.
Other franchising pros include:
- A turnkey operation with standardized products and systems
- Uniform packaging
- Point of sale and national advertising programs
- Reduced risks
- Research and development conducted by franchisor
- Standardized accounting systems
- Financial and marketing available through franchisor
- Assistance with determining the business location
However, starting a franchise is not without risk. Franchise cons include:
- Lack of control
- Contractually bound to franchise
- Business can be affected by the overall problems or bad publicity of the franchise
Once a potential franchisee determines that the pros outweigh the cons, he or she must determine if the new venture is affordable. According to Franchising.com, prospective franchises must meet certain financial requirements based on liquidity of assets of net worth. These requirements may vary based upon the individual franchise and the profitability of the business, according to Entrepreneur. For example, 1000 Degree Pizza requires franchisees to have $50,000 in liquid assets and a net worth of $200,000. The Initial franchise start-up fee is $29,500 per unit. Owner Brian Petruzzi advises prospects to expect an overall build of equipment to cost $175,000-$300,000.
Potential franchisees must also consider the company’s Franchise Disclosure Document (FDD) which must be made available at least 14 days prior to being asked to sign a franchise agreement. This document must disclose the current financial situation of the company, lawsuits involving the company and its board members, franchise fees, and other information that could affect the franchisee’s business, according to Lawyers.com
Potential franchisees are urged to review the FDD with an attorney before he or she signs the contract and undertakes the benefits and risk of the franchise.