Some of the largest and most profitable businesses in America are franchises. The concept is simple. An established business wants to expand, but its owners don't want to invest the time or money it takes to open a new store. If their business model is solid and there is interest from investors, they can grant them the right to offer products or services under their trade name or trademark. In return, the franchisor will charge franchise fees, which are typically a fixed percentage of annual revenues. The franchisee may also have to kick in for advertising costs, especially when the company is a national brand.
For example, a huge fast food chain like McDonald's charges much more in franchise fees than a new franchise, since their brand name and proven products virtually guarantee a steady stream of customers. The franchisee also has to pay for startup costs, which include construction and equipment costs. What does the new owner get for his investment?
Profitable franchisors have proven business models that have been successfully implemented thousands of times in locations around the world. For example, McDonald's has over 33,000 restaurants in 119 countries. Their franchises serve over 68 million people on a daily basis! In other words, they feed the equivalent of the world's population every 100 days!
Of course, most franchises are not as popular as McDonald's. Some have only a few stores in regional locations. Those that are interested in buying or building an existing franchise should consider the costs and benefits. Yes, a franchise is generally less risky than starting a new business from scratch, since it is based on a proven idea. But there may also be less room for profit because franchise fees must be remitted to the franchisor. There is also less freedom.
If McDonald's instructs its franchisees to sell a new hamburger, they must abide, no questions asked. However, the owner will not be responsible for training and will receive help and support from the franchisor. After all, it is in their best interest to see that the new owner is successful. Not only will they receive more revenues, but that successful owner is more likely to open more franchises. In fact, many McDonald's owners operate multiple restaurants and do quite well for themselves.
But before you jump in headfirst, it is important to have an experienced franchise lawyer review the business contracts. Because their companies are based on them, most franchisors have iron-clad contracts that clearly delineate the terms of trading between the two parties. The terms of these agreements override any other arrangements. Therefore, it is imperative to have a franchise attorney peruse them before you sign.
No matter how reputable a franchisee may be, many business owners have be burned by agreeing to terms and conditions of contracts they didn't fully understand. Don't depend on your instincts! Business dealing are complicated enough without expert advice and guidance from a qualified franchise lawyer.
If you are thinking about buying or building a franchise in the State of Florida, contact Zarco Einhorn Salkowski & Brito, P.A. today! The firm handles all aspects of the franchise process, including but not limited to contract law. They also help businesses establish new franchises, which may involve licensing and distribution law. When there is a complex contract dispute, a franchise attorney from the firm will work to resolve the matter as quickly and as quietly as possible.
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