With any new business, there is always the potential for failure. Prospective franchisees often look into franchising because they want to run their own company and they are looking for the most stable way to become a business owner.
Franchisees are more likely to succeed when they have thoroughly researched and planned their franchise ownership. If the franchisor supports the franchised business, there is brand recognition, and the franchisee knows what to expect, the franchisee is more likely to succeed.
The franchisor supports the franchised business.
Franchisors may provide franchisees with location selection assistance, training, and operational support. Many franchisors provide advertising and marketing support, but franchisees have to pay for those services, often through contributions to an advertising fund. Some franchisors also provide financial support to franchisees. Existing franchisees are a good source of information about the support provided by a franchisor.
There is brand recognition.
An established brand with protected trademarks and trade dress can contribute to the success of franchisees. Consumers already recognize many franchised brands and know what to expect at each franchise location. Franchisees may be more successful than other new business owners, and reach success more quickly, when a customer base already exists and customers know what the franchised business offers.
The franchisee knows what to expect.
Franchisees should expect to pay fees in exchange for the rights granted by the franchisor. This includes an initial franchise fee, royalties, and advertising and marketing fees. Franchisees should also expect to incur other costs of doing business, such as the cost of finding, buying or leasing, and building out a location, and purchasing equipment. Franchisees, like other business owners, also pay legal and accounting fees, insurance costs, and salaries and employee benefits. Franchisees who accurately predict all of these costs and include them in a business plan are more likely to succeed. The Franchise Disclosure Document should provide accurate information that a prospective franchisee and its legal and accounting team can utilize to understand what costs to reasonably expect.