Small business · Business Development

What things should be taken care of before starting investing in Franchise ?

Varun Singh Senior Engineer on RDS(Relational Database Services) at Jio Cloud at Reliance Jio

December 6th, 2016

Not sure whether my question is relevant here but I need to know about below things
  • What are the things I should take care before started investment in franchise.
  • What if I don't have any prior experience or business involved in Franchise (like Food or Health/ Beauty) ?
  • How can I make sure that my investment to be actually a good one?
  • Other things - What are the challenges regarding staff and other challenges involved when you buy franchise ?
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Martin Omansky Independent Venture Capital & Private Equity Professional

December 10th, 2016

I know that I asked you to expand upon your questions, but I would like to contribute a couple of short cut-routes to the most important matters, (1) Keep working on that financial partner. You cannot buy or operate a good franchise without money. (2) Find somebody who is successfully operating the same franchise, sign an NDA with him/her, and have a qualified lawyer, your accountant, and you look at his *real* books and operations. (3) If you have the time and patience, apprentice yourself to that franchise to learn everything about it. (4) Look at the regulatory and legal environment governing franchises in your jurisdiction. (5) You and your lawyer should look very carefully at the franchise documents. Some of them can be very tricky. (6) Be especially aware of the fees, overrides, advertising contributions, etc due to the franchise headquarters. (7) Please remember that the franchise seller is in the *franchise business *- he is motivated by selling and getting continuing revenue from others, no matter how much he waves his arms and tells you that he loves hamburgers, chicken, etc. (8) Model a firm that does the same work as the franchise, and determine if you could establish and operate a business without having to pay franchise fees or to be answerable to a franchising group. (9) Remember that franchises were created because managing a large chain of retail stores from a remote location is hard, and because local managers often skimmed profits. Even large centrally-managed chains like Wal-Mart have problems of employee theft, although, to be fair, the use of computers for revenue recognition and inventory control, and the wide-spread use of credit cards, have made such security concerns less of a problem.

Varun Singh Senior Engineer on RDS(Relational Database Services) at Jio Cloud at Reliance Jio

December 10th, 2016

Thanks Martin but currently I don't have any co-investor/ partner with me . I am in search of that but meanwhile could you help me with some of the answers to the above questions?

Martin Omansky Independent Venture Capital & Private Equity Professional

December 6th, 2016

Your questions suggest strongly that you are new at this. So, instead of answering the questions, I would recommend d you find a co-investor/partner who knows about in investments in franchises and specific information about the target industry. Sent from my iPhone

Martin Omansky Independent Venture Capital & Private Equity Professional

December 10th, 2016

Mr. Singh: Can you be a little more specific with your questions? Sent from my iPhone

Varun Singh Senior Engineer on RDS(Relational Database Services) at Jio Cloud at Reliance Jio

December 10th, 2016

Thanks Martin , it is helpful !!! I will keep these points in mind especially the 2nd point and 6th point.