Opening a franchise location of an existing business can be an exciting venture. However, operating this type of entity does not automatically mean there won’t be risks or challenges. Therefore, as with any business opportunity, you will want to consider the pros and cons of opening a franchise before signing an agreement or committing to an endeavor.
The Franchise Business Model
There are an estimated 750,000 franchise locations throughout the United States. These businesses include everything from quick-service restaurants, dry cleaners, and gyms, to hair salons. The franchise business model, or franchising, involves an established business (franchisor) giving another business owner (franchisee) to use its name, branding, model, and other intellectual property. In exchange, the franchisee agrees to pay fees, royalties, or sales percentage revenue to the franchisor.
Type of Franchise Agreements
There are various types of franchise agreements, some of which include the traditional business model described above. There are also arrangements where a franchisee will distribute the franchisor’s products. Manufacturing franchises exist when a manufacturer has the exclusive rights to produce products under the franchisor’s brand and trademark.
Pros of Entering into a Franchise Agreement
One of the primary advantages of acquiring a franchise is stepping into an established business model. This format can take much of the guesswork out of setting up a new enterprise. When you work under a franchise agreement, you already have a proven business plan to follow.
You also get the benefit of selling or distributing a recognized product. Standing out in today’s market can be challenging. When you own a franchise, you don’t have to create your brand. Franchise agreements also usually encompass training programs and materials for employees and have instituted operating procedures for the business. These programs often include proprietary processes and software. Franchises also usually include marketing and advertising that the franchisor will manage. Franchisees also usually benefit from inventory and equipment at a reduced cost.
Cons to Entering into a Franchise Agreement
One of the most significant deterrents to franchising is the expense. Franchise fees can be as must as hundreds of thousands of dollars. In addition, franchisors typically have to pay start-up expenses. These costs may be extensive. There is also the drawback of not having as much autonomy. Business owners usually want to make independent decisions based on what they perceive to be best for the enterprise. The franchisee may have some limited autonomy. However, for the most part, With a franchise, the franchisor establishes the procedures and the rules, and the franchisor is obligated to comply. There is also the matter of paying ongoing royalties to the franchisor. As a franchisor, you will also be bound by franchising agreement terms that may or may not be to your benefit.
Deciding to enter into a franchising agreement is a significant decision that should be weighed carefully. In many ways, acquiring a franchise will involve the same issues and considerations you would have when deciding to open your own business. The best way to evaluate the pros and cons of acquiring a Florida franchise is by consulting with an experienced Florida business attorney. Your business lawyer can help you assess your opportunity and determine the options that will work best for you and your circumstances.
Contact an Experienced Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.