What you should know first hand before buying a franchise

Having  your own business is a great step for many people. People with savings and capital to invest are beginning to find real success with franchise business. You could, for example, franchise McDonalds, or Seven Eleven or a gasoline station, and other businesses that have franchise framework. However, before buying a franchise, there are information you must know first and before hand before going into a franchise business. So, before asking, how can I get a franchise?  Know these important information before getting involve in a franchise business.

1. What's my upfront cost going to be? This is the most obvious initial financial question. But immediate out-of-pocket costs are only one consideration in franchising.

2. What other fees should I plan on? You may be required to lease property or equipment from the franchisor. You may also have to pay the franchisor a percentage of your annual sales. Those numbers must be cranked into your own equations when you're trying to figure out if a franchise deal makes sense.

3. How is the franchisor making money? Franchisors may make money by owning their own establishments, by providing services to franchisors, by simply collecting initial franchise fees from people like you or by some other combination. It's tough to make a blanket statement about whether one model is better than another, but surely you want to know where the franchisor's own interests lie.

4. What restrictions do I have on suppliers? Are you going to be required to purchase certain goods or services from particular vendors and/or from the franchisor? If certain purchases are required, are they going to cost you more than you would otherwise have to pay if there were no restriction on where you could buy them?

5. What kind of regional protection am I getting? Do you have any guarantees that the franchisor isn't going to sell other franchises or open up its own outlets in your geographic area? If so, how long are those guarantees good for?

6. What kind of empire-building opportunities do I have? The flip side of the previous question: Do you get first dibs on new franchises in or near the same area as your first franchise? Some of the most successful franchisees are those who own multiple outlets in the same area and are able to develop their own economies of scale.

7. How many franchisees fail in a year? You'd want to find out how many (or what percentage of) franchisees close their doors within the first year or two years, and how many or what percentage of all franchisees close annually.

8. How many franchisees sell out in a year? A franchisee that gets out of the business by selling to someone else isn't necessarily included in the statistics of "failures." Indeed, he or she may be selling a successful venture. But you still need some idea of the turnover rate of franchisees.

9. What's the value of a re-sold franchise? Another way of looking at the prospects for franchisees is to look at what happens to those who sell their establishments. What did they get for the re-sold franchise relative to what they put into it? Was it a profitable investment, or were they simply looking to get out and cut their losses?

10. How do I get out of this deal, if necessary? Put another way, would you be allowed to sell your franchise? Can you sell to anyone, or do you have to deal with the franchisor? Would the company charge you something to sell your franchise or otherwise restrict your ability to pull out of the business?

Source: Joseph Anthony,http://www.microsoft.com/business