Buying a Franchise – A Simple Breakdown
The Federal Trade Commission’s (FTC) Guide to Buying a Franchise is the best way to start your quest. Some brands require their franchisee to have a net worth of $500,000. If your financial standing does not meet this criterion, find another niche. Similarly, do not ignore specific business only by looking at the fine print. Another important document is Franchise Disclosure Document (FDD). You will receive it from your franchisor. However, franchise representatives usually cannot provide information about earnings-related questions. You can get all these information from existing franchisees.
Therefore, you should make sure you have a franchise business plan before making any decisions. FDD is a highly informative document where you can find the answers about the type of training your franchisor will offer you, hidden costs in term of the opening day; discounts or special promotions, bankruptcy filings by the franchisor and litigation involving the management.
Being a franchisee, you must know about your financial standing. You will waste a lot of time in finding and searching franchise opportunities without knowing your budget limits.
It is best to prepare your net worth statement before deciding to become a part of a franchise business. Prepare a list of your assets and the liabilities. The difference between your assets and liabilities is your total net worth. Your franchisor will require this information from you. Mostly the franchisor set their minimum net worth requirements.
Always consider beyond the minimum buying requirement of the franchise, listed as registration fee and equipment cost. Do not ignore the costs that involve marketing and advertising activities. You need a significant amount of money to survive on break-even point and the initial loss period before your business actually starts hatching the profits.