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Entrepreneurship Through Franchising – Let Transworld Map Your Way

This post is sponsored by Transworld Business Advisors of North DFW

To own a business is the dream of most people with ambition… But, why? Is it job security? Financial independence? Or the ability to control your own destiny? Yes, yes, and yes, but let’s dive deeper to see if a franchise is the business opportunity calling your name.

Every industry has their own language and the industry of buying and selling franchise businesses is no different. Understanding the basic terminology can help get you started on the right foot. Transworld Business Advisors, with Tiffany Swartz and David Cheek, is here to help you every step of the way, so let’s start with a few commonly used terms.

Franchising is a form of business by which the owner of a product or service expands or obtains distribution through affiliated dealers (also known as franchises).

  1. Franchisor
    A franchisor owns the rights and trademarks of a company and then allows a third party (the franchisee) to use these rights and trademarks to conduct business at a franchise location. In return for a fee, the franchisor (owner) grants the rights to operate a branch of the business under the names, brands, and associated aspects of the business. The franchisor ultimately owns the brand and proprietary knowledge of the specific business entity.
  2. Franchisee
    A franchisee is the person or party that is purchasing the right to use a business’s trademarks, associated brands, and other proprietary knowledge in order to open a branch. The franchisee invests in their location and use of the brand and any intellectual capital inherent in the brand as long as they adhere to the business rules and payment structure the franchisor requires to be brand compliant.
  3. Franchise Fees
    The franchise fee (also called the “initial franchise fee”) is the payment made by a franchisee to the franchisor for joining the franchise system. This is the initial payment that the franchise makes to the franchisor when they become a franchise. The franchise fee is typically a one-time upfront flat fee, paid upon signing the franchise agreement for the right to use the brand name of the franchise. This payment acts as compensation to the franchisor for the initial training and support for new franchisees. The amount a franchisor sets as their franchise fee varies from industry to industry and even within franchisors in the same industry.
  4. Royalty Fee
    A royalty fee is a payment made from the franchisee to the franchisor to compensate for the use of the franchise brand. The use of royalties is common in franchise situations where an original owner chooses to sell his product to a third party in exchange for royalties from the future revenues it may generate. Royalties are often expressed as a percentage of the franchisee’s revenues. Many factors affect the royalty rate including exclusivity of rights, risks involved, market demand, technologies involved, and the level of innovation the product or service provides the franchisee.
  5. Protected Territories
    Many franchisors grant their franchisee an exclusive area or territory, where no other franchises belonging to the same underlying business can set up shop. These territories are commonly known as protected territories, or areas of protection. As the name suggests, the purpose of a protected territory is typically to prevent internal competition and to protect franchisee sales from being cannibalized by other locations utilizing the same brand in close proximity. Protected areas or territories may be defined by a radius in miles, postal codes, or cities. Territories are protected for a specified amount of time and agreed to in the franchise agreement.

Because no two franchisor’s operations or agreements are the same, it’s vital that prospective franchisees obtain the assistance of knowledgeable and experienced franchise professionals. Transworld Business Advisors can help you identify any problem areas in the contracts, or franchise agreement, that can lead to confusion and future disputes over the franchise agreement.

CEO of Transworld North DFW Tiffany Swartz says,

We talk with a lot of corporate people who think that franchises are ‘safe.’ They think they can just drop $500,000 into a business and it will run itself. A franchise is just as much work as any other business… Yes, you typically have a brand name and a support system in place, but there’s no avoiding the ‘hustle’ it takes to get a business off the ground.”

“Most buyers (about 80%) purchase a DIFFERENT business than the one they initially inquire about or express interest in.”

Tiffany and David have some advice on things to consider when buying into a franchise opportunity:

To start, Transworld conducts a comprehensive plan for your franchise search with questions like…

With all these questions in mind, CEO Tiffany Swartz and President David Cheek will create an all-inclusive search plan to help you find the right franchise for you.

Transworld Business Advisors of North DFW is a part of the International Franchise Professionals Group. With access to over 400 different franchises that they can promote and sell, you as the buyer don’t have to pay at all for the consulting advice and the buyer has access to additional benefits when a broker negotiates the deal. 

“Owning a franchise allows you to go into business for yourself, but not by yourself.”

Transworld Business Advisors is here to help you map your way through a potential franchise opportunity. If you invest in one of their proven franchise opportunities, and follow the system the franchisor has put in place, you should be on your way to running a  successful business.