How do I Choose the Best Business Franchise? (with picture)

Carol Francois
Carol Francois
A cup of coffee from a coffee shop franchise.
A cup of coffee from a coffee shop franchise.

The best business franchise is one that generates steady profit for the business owner. A franchise is a specific type of business structure that is commonly found with large brand name retail stores. A franchise agreement allows an independent operator to use the trademarks of a specific business and sell the products that are unique to that business. In return, the franchise owner pays a royalty fee and percentage of gross sales to the parent company.

Fast food is one of the most obvious examples of franchising operations. In a business franchise, the independent operator signs a multi-year agreement and receives specialized training, access to required merchandise, trademarked materials, and more. Included in this type of agreement are international or national advertising campaigns, support services, upgraded technology support, and start-up assistance.

Evaluating the best business franchise involves a combination of factors: cost, owner experience, and contractual agreement. Franchising is the fastest way to become a business owner. However, it is important to understand the benefits and risks associated with this type of business relationship.

There are two costs associated with selecting the best business franchise: initial investment and recurring percentage of sales. When comparing different franchise options, it is easy to get distracted with the initial investment. However, it is the percentage of sales value that is more important. The initial investment is a one-time cost, whereas the recurring payment has a serious impact on cash flow throughout the operation of the business.

When selecting the best business franchise, select one where the owner has previous experience or training. For example, someone who has worked in a retail store in a range of positions understands the requirements of those positions, skills required, and potential problems. Understanding where the weaknesses are is essential to the proper management of this type of operation. People with little or no experience may find it necessary to hire site managers, increasing costs even further.

Although franchising is a very popular way to become a business owner, many people are unaware of the degree of control maintained by the parent company. This control typically encompasses store layout, logos, images, advertising, pricing, hours, and uniforms. In addition, many agreements state that all materials must be purchased from the parent company. The prices for raw materials or goods may be higher than available at the retail or wholesale level, which is a common cause of frustration for franchise owners.

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    • A cup of coffee from a coffee shop franchise.
      A cup of coffee from a coffee shop franchise.