Should I Invest in a Franchise?
Posted on March 12, 2008
Filed Under Franchises
B.J. asks:
“Can you comment on Gift Basket Franchises vs “Start from scratch businesses”. “
I’ve never investigated gift basket franchises. It’s best for you, if interested in this type of investment, to consult legal counsel before signing an agreement.
The differences between a general franchise and starting an independent business centers around several factors.
- Investment money. A franchise will expect you to hand them thousands of dollars for being part of the organization. When you start from scratch, you control how much money is invested.
- Mentoring. A franchise usually includes guidance, either at a specific facility and/or by phone, for a period of time. When you start from scratch, you must search for a mentoring program, which you’ll pay for according to the mentor’s fee structure.
- Inventory. A franchise may or may not provide you with baskets, supplies, and other items to start your business. Some franchises tell you that you must buy your inventory exclusively from them. Starting from scratch means you find and purchase your own materials.
- Business name. Buying into a franchise may mean that you must use the franchise’s name for your business, which is good for recognition as long as customers are familiar with the name. Edible Arrangements and Quiznos are two examples. Starting from scratch means you name your business on your own.
- Marketing power. Some franchises will provide matching dollarsto market your business, its location, and available products. Some will not. When starting from scratch, all marketing costs come out of your pocket.
- Franchise fees. Some franchises charge monthly or yearly fees. Starting from scratch means that you invest as much as you want in your business whenever you want.
- Monitoring. A franchise reviews your business and financial records on a regular basis. Working for yourself means that no one sees your documents except you, a trusted accountant and attorney, and the Internal Revenue Service (if located in the U.S.) if contacted for an audit.
These are the major differences I’ve learned about franchises, and there are more. However, what I outline here does not necessarily apply to any gift basket franchise selling their service in the U.S. or abroad. If a gift basket franchise abides by any of what I’ve outlined above, it’s coincidence.
Each franchise makes up their own rules. That’s the beauty of operating a chain of franchises. When you start from scratch, you can also make up your own rules, as long as you stay within general guidelines set by your state or country. That’s the beauty of owning an independent business.
[tags]gift baskets, starting a gift basket business, owning a franchise, how to choose a franchise[/tags]
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