Our principal Robert Tanner, is a franchisee himself. He grew up within the Auntie Anne’s franchise brand and has also had experience with Great American Cookies and Cinnabon. Currently at this time Rob has several Tropical Smoothies, Popeyes, and Hagen Dazs locations. Our team is able to assist you with your Franchise process from Identifying the Real Estate to the application process to lease negotiations to project management, etc. We help our franchise clients from personal and professional experience!
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A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the franchisor's business name. In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees.
Franchise contracts are complex and vary for each franchisor. Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights, or trademark, from the franchisor in the form of an upfront fee. Second, the franchisor often receives payment for providing training, equipment, or business advisory services. Finally, the franchisor receives ongoing royalties or a percentage of the operation's sales.
A franchise contract is temporary, akin to a lease or rental of a business. It does not signify business ownership by the franchisee. Depending on the contract, franchise agreements typically last between five and 30 years, with serious penalties if a franchisee violates or prematurely terminates the contract.
In the U.S., franchises are regulated at the state level; however, the Federal Trade Commission (FTC) established one federal regulation in 1979. The Franchise Rule is a legal disclosure a franchisor must give to prospective buyers. The franchisor must fully disclose any risks, benefits, or limits to a franchise investment.1
This information covers fees and expenses, litigation history, approved business vendors or suppliers, estimated financial performance expectations, and other key details.
There are many advantages to investing in a franchise, and also drawbacks. Widely recognized benefits include a ready-made business formula to follow. A franchise comes with market-tested products and services, and in many cases established brand recognition.
If you're a McDonald's franchisee, decisions about what products to sell, how to layout your store, or even how to design your employee uniforms have already been made. Some franchisors offer training and financial planning, or lists of approved suppliers. But while franchises come with a formula and track record, success is never guaranteed.
Disadvantages include heavy start-up costs as well as ongoing royalty costs. To take the McDonald’s example further, the estimated total amount of money it costs to start a McDonald’s franchise ranges from $1.3 million to $2.3 million, on top of needing liquid capital of $500,000.
By definition, franchises have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or revenue. This percentage can range between 4.6% and 12.5%, depending on the industry.
For uprising brands, there are those who publicize inaccurate information and boast about ratings, rankings, and awards that are not required to be proven. So, franchisees might pay high dollar amounts for no or low franchise value.
Franchisees also lack control over territory or creativity with their business. Financing from the franchisor or elsewhere may be difficult to come by. Other factors that impact all businesses, such as poor location or management, are also possibilities.
Pros
OUR TEAM’S UNPRECEDENTED PROFESSIONALISM, SKILL, AND ATTENTION TO DETAIL HAS ALLOWED US TO SET SALES RECORDS FOR THE PAST YEARS. WE WILL ENSURE YOUR BUYING OR SELLING EXPERIENCE EXCEEDS YOUR EXPECTATIONS.