The partners in a franchise agreement are the franchisor, who grants permission or a license to use its business concept to the franchisee, who invests in the business.
Remember, a franchise is NOT an independent business. The franchisee buys the opportunity to run a business based on the franchisor’s established operational methods, often detailed in an operations manual. These methods ensure that all the products and services offered by the franchisee conform to consistent quality standards wherever a franchised unit is located.
An Operations Manual takes the pressure away from the franchisee to create a strategic plan on how the business is run. The business logistics, such as marketing, product assembly, service delivery, accounting, store layout, employee recruitment and training, are all mapped out. Most franchisors provide training to the franchisee to help ensure that the business is run according to proven methods.
The obligations of both the franchisor and the franchisee are fully laid out in the franchise agreement. It is essential for any prospective franchisee to consult with a lawyer experienced with franchise agreements and business contracts before signing the franchise agreement or any documents connected with opening a franchise.
The agreement will stipulate all the terms of the business relationship, such as initial fees, ongoing royalties, territory restrictions, operational support provided, the length of the franchise relationship, terms of renewal (if applicable), and provisions for selling or closing the franchise.
When you buy a franchise you are agreeing to uphold the franchisor’s way of doing business. In return, you gain the right to run an individual (or multiple) business unit(s) built on proven methods with a higher probability of success than an independent business given the same amount of work is put into the venture.
Franchise Success Story
Stewart Hayward of Snap Fitness in The Colony, TX, tells us why he decided Snap Fitness was the franchise for him:
"I'm a former telecommunications engineer with one Snap Fitness club open and two more on the way. Before signing as a Snap Fitness franchisee, I looked at other concepts: airduct cleaning, hardwood flooring, vehicle detailing - anything but fast food!
"Snap's business model sold me, including (in my opinion) the reasonable membership volume required to make a profit. I also like the flexibility in the Franchise Agreement, which gives me latitude to do some things my way.
"From the beginning, I've followed the game plan laid out for me - and the whole package works! The big selling points are no contracts and 24/7 access.
And here's something I think you'll find in your area too: the people who join like our comfortable, non-intimidating, neighborhood feel - compared to those "big boxes" full of Ken and Barbie clones looking for dates.
"No matter what businesses you're evaluating, my advice: build a business plan. Look especially at your first three months (when cash flow is tight), the first year and a five-year overview. And talk to franchisees, learn how they pulled together their plans.
"This approach really helped me. Best of luck to you - and be well."