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What should I consider if I want to buy a franchise?

On Behalf of | Nov 1, 2022 | Business Formation & Planning

Prospective business owners in New Jersey might want to forego coming up with an idea of their own and instead choose to buy a franchise of an existing business. This is an understandable perspective given the perceived success of the prominent franchises across the nation.

However, it is not a simple process and there are challenges that inevitable arise. When thinking about this, it is essential to understand what to look for. Not only can it be risky financially, but personally as well. From the start, people who are simply doing background research before taking the leap or have already started the process should have comprehensive help.

What should I consider when I think about buying a franchise?

The franchiser will give the franchisee the license to operate under the company name. If, for example, it is a fast food restaurant, there will be a detailed list of requirements that must be met to maintain the brand. The licensee gives the franchisee help in getting the business off the ground from finding a location, organizing the business, getting merchandise together, training the staff and managing it.

While franchisees are under the impression that they are working independently, that is not always the case. The franchiser often has a specific way of operating and it determines a significant portion of how the business is run from its location to the items that are offered all the way down to how employees are expected to comport themselves.

Franchising is good foundation upon which to build. The mistake franchisees may make is by not fully understanding what they are getting into. They could sign a contract and suddenly be in heavy debt without any way of getting out of it once they decide it is not what they expected and they do not want to proceed.

New Jersey is not a state that requires franchise registration meaning that people who sell a franchise in the state do not need to provide a Franchise Disclosure Document to the state regulator. Some franchises might seem to be a good business but are far more complicated than anticipated and the income is not as much as the franchiser may have suggested would be available.

Local help can navigate the complex terrain of starting a business

Starting a business can be exciting and it may seem like the possibilities are limitless. A franchise can be a good way to get a foot in the door to business ownership, but there are pitfalls that can be avoided if the person who is considering it has comprehensive help. Whether a person is overzealous or hesitant, they should have advice with business formation and planning from the outset.