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Franchises: Investigate before you Invest

Of the thousands of new businesses created every day in the United States, many are franchise outlets. If you've ever thought about buying a franchise, here are some facts worth considering.

A franchise gives the buyer the right to use a trademarked name in selling a product or service. The purchase of a franchise includes training, location assistance, inventory to get started, and advertising support. In addition, most franchises have a proven business model and a record of success.

There are costs connected with buying a franchise beyond the usual business expenses of payroll, rent, etc.

First, you must pay an initial franchise fee which can range from thousands to hundreds of thousands of dollars.

Second, you must also pay an ongoing royalty to the franchiser, which is typically a certain percent of sales.

Third, there are often separate payments and fees required to may pay for advertising campaigns and administrative projects.

To research a franchise opportunity, start by looking over its Uniform Franchise Offering Circular. Details to review in addition to fees are territory size, training offered, competition, franchisee turnover, and termination rights. Next, interview as many current franchise operators as possible. Are they profitable? How long did it take to become profitable? Are they satisfied with the support they receive from the franchiser?

Finally, ask yourself some crucial questions. Are you really interested in the franchised product or service? Will you be able to devote the necessary time to the business? Do you have the financial resources to get the business up and running? Are the franchise name, training, and support worth the fees? If your answers are positive, you may have found the right route for starting your own business.