Want to start your own franchise? Seek the advice of an accountant, a banker and a lawyer to help vet the franchise opportunity.
When you decide to start your own business, the first thing you should do is research, research, and then research more. Whether you build it from scratch or choose a franchise opportunity, research is necessary before you even come close to opening your doors. If you opt to join a franchise network because you want to run your own business while taking advantage of the guidance an established franchisor can offer, you need to look for more than an established brand name, and your research shouldn’t stop once you settle on an industry and product.
All franchise opportunities are not created equally. Even brands in the same industry offering similar products are often vastly different. Just a few of the many factors that need to be considered before signing on the dotted line include the level of investment required, classes or tiers within the network, franchisee profiles, initial fees, continuing fees, territorial rights, supply chains, sources of revenue, marketing requirements, training provided, headquarters and field support, in-term obligations, post-term obligations, length of the franchise agreement, and renewal possibilities. Every franchise system is different, which can have a direct impact on your business plan and projected return on investment.
Before you make a commitment that may not fit with the goals and vision you have, enlist some help. Impartial advice from three key professional advisors can reveal the big picture of starting your own franchise and help determine if the venture is right for you. Read on to find out who they are and why their input is so important.
Having an interest in business and expertise in finance are often mutually exclusive, but it’s a smart idea to seek the advice of an accountant. You may think you have an overall understanding of start-up fees and ongoing costs to keep your business running, however, an accountant with franchise experience can take you through each fee line by line and verify your calculations. The last thing you want when starting your own franchise is to fall behind before you have a chance to earn a profit. If you don’t have a large amount of collateral upfront, an accountant can also advise you toward a franchise with better financing options. After you open, a franchise-specific accountant is also beneficial for tracking costs and business growth to make sure you’re advancing toward your goals. Because they are paid to manage your money in the best way possible, it’s their job to make sure you spend and plan wisely without throwing money away on hidden costs.
A banker may be your best source for impartial advice because the main purpose of their job is to say no. They are conservative by nature and making a bad loan for a risky business venture can impact their own livelihood. A banker is your best source to find any hidden potential risks in a franchise opportunity or flaws in your proposed business plan. Think of your banker as your professional pessimist. There is no such thing as risk-free in business, but a banker can give you a clearer picture of exactly how much risk is involved and help determine if the franchise opportunity you’re interested in is right for you.
When you’re handed a franchise agreement, there may be pages of legal terms and restrictions you may not fully understand. To protect yourself from unnecessary risk or obligation, have an experienced franchise lawyer give it a thorough review. They can determine if the agreement is standard or includes any unusual clauses or hidden costs you may be obligated to pay if you sign.
It’s best to consult with an accountant and banker before reaching out to a lawyer, as they aren’t who you would employ for financial advice. Your business plan and cost detail should be established before this point. Think of a lawyer as the final fine-tooth comb that will weed out any details that may have been overlooked. A lawyer can advise you on typical franchisor obligations when welcoming a new franchisee and can confirm if they are committing adequate support to you and your business. Most importantly, a lawyer will ensure legal protection and prevent you from signing an illegal or unethical agreement.
Don’t be Afraid to Ask for Advice
The most successful business owners know that it takes a village to get a business up and running, and you shouldn’t shun valuable advice for the sake of being able to say you’re doing it all on your own. At the end of the day, the business will be yours to run but consulting from impartial sources beforehand can mean the difference between a profitable venture versus a short-lived, preventable failure. If you’re looking into starting your own franchise, you should be willing to absorb all the knowledge and guidance you can to build a long-lasting and sustainable business. A little help from the right advisors including an accountant, a banker and a lawyer can go a long way.