Buying a Franchise

Want to be your own boss, but aren't willing to take on the risk of starting your own business from scratch? Franchising can be a great alternative if you are an entrepreneur with limited resources or business experience, and you want to have some guidance in the start-up phase of the business.

What is Franchising?

A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchiser or that meet the franchiser's quality standards.

Franchising is based on mutual trust between the franchiser and franchisee. The franchiser provides the business expertise (marketing plans, management guidance, financing assistance, site location, training, etc.) that otherwise would not be available to the franchisee. The franchisee brings the entrepreneurial spirit and drive necessary to make the franchise a success.

There are two primary forms of franchising:

• Product/trade name franchising

Franchiser owns the right to the name or trademark and sells that right to a franchise.

• Business format franchising

Franchiser and franchisee have an ongoing relationship, and the franchiser often provides a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing.

Know the Facts First

Before you decide to franchise, you need to do your research. You could lose a significant amount of money if you don't investigate a business carefully before you buy. By law, franchise sellers must disclose certain information about their business to potential buyers, so make sure you get all the information you need first by entering into this form of business.

To learn more about franchising opportunities, visit the franchising page at the Small Business Development Center National Information Clearinghouse site.