When buying a franchise, it is important to have a long-term plan. Buying a franchise is a long-term investment, and if you don’t have a strategic plan for recouping your investment, you could find yourself struggling to get out from under significant financial losses.
Owning a franchise is unlike owning an independent business. So, from a long-term perspective, what are your options as a franchisee?
Your Four Primary Options As a Franchisee
Generally speaking, franchisees have four primary options when it comes to recouping their investment and planning for the future. These options are:
1. Keep Your Franchise for As Long As Possible
As a franchisee, one option is to keep your franchise as long as possible. Many franchisees are content with operating a single outlet, and their goal is to keep renewing their franchise while building an enduring presence and reputation in their local community. While this is certainly a viable option, it is just important to keep in mind that you will most likely be subject to competitive restrictions when your time as a franchisee eventually comes to an end.
2. Grow Through the Acquisition of Additional Franchises
Another option is to grow through the acquisition of additional franchisees. For many franchisees, the limited profitability of a single franchised outlet is not enough. To enhance their profits, they will purchase multiple outlets—either within the same franchise system or across multiple brands. While the largest franchisees in the world own in excess of 1,000 outlets, there are numerous franchisees who have portfolios in the single and double digits.
3. Sell Your Franchise and Move On
A third option is to sell your franchise once it becomes an attractive business investment. This could involve selling the franchise back to your franchisor or transferring your franchise to a third party. Both options present unique benefits and risks, and if you decide that you are ready to sell, you will need to work with an experienced attorney who can guide you through the process.
4. Gain Business Experience You Can Use for Your Own Venture
The final option for most franchisees is to use their franchise ownership as a learning experience. You can buy a franchise, learn from the franchisor, gain practical business experience, and then launch your own business venture when your franchise agreement expires. While this is a viable option as well, here too, it is important to keep in mind that your franchise agreement’s post-termination restrictive covenants will apply. These covenants could limit the type of business you are able to open, the location where you are able to operate and your ability to market to your franchise’s customer base.
Considering a Franchise? Contact Goldstein Law Firm for a Free Consultation
Making sure you have a long-term plan is just one of numerous important considerations during the franchise buying process. If you are considering a franchise, we encourage you to inquire about our fixed-fee franchise business review programs for prospective franchisees. To get started with a free, no-obligation consultation, call 202-293-3947 or get in touch online today.
