From stores that sell Halloween costumes to stores that sell winter holiday décor, we see lots of seasonal businesses pop up this time of year. Recently, we have seen a trend of businesses offering holiday decorating services as well. Many of these stores are franchised outlets. If you are interested in owning a holiday-centric business, is a seasonal franchise right for you? Here are 10 key considerations from franchise lawyer Jeffrey M. Goldstein.
10 Key Considerations for Buying a Seasonal Franchise
1. Seasonal Franchises Are . . . Seasonal
The first thing to keep in mind is that seasonal franchises are in fact seasonal. You will only be operating your business for a couple of months during the fall or winter season—and you will need to figure out what you are going to do for the rest of the year. Where are you going to store your inventory and marketing materials? How much is this storage going to cost? How are you going to earn a living during the remaining months when there isn’t a demand for your products or services? These are just a few of the many important questions you will need to answer.
2. Are You Prepared to Make a Long-Term Investment?
While owning a seasonal franchise might seem enjoyable at the moment, it is important to understand that buying a franchise is a long-term investment. Are you prepared to do what it takes to make your investment profitable over the long haul? If the answer is yes, then buying a seasonal franchise might be a good option for you. If the answer is no, you will most likely be better off looking for other opportunities.
3. Will You Be Able to Turn a Profit?
Between the limited time your franchise will be open for business each year and the competition you will face during the holiday season, it will be critical to carefully assess your ability to turn a profit. Not all franchise owners—including full-time franchise owners—find a path to profitability. While there are no guarantees in business, you will want to do what you can to assess the financial viability of your targeted seasonal business opportunity.
4. What Will You Do in the Off Season?
Operating a seasonal franchise is generally a full-time endeavor during the holidays. This can make owning a seasonal franchise a challenge for many people who work a full-time job or operate another full-time business. If you need to devote yourself to your seasonal franchise during the fall or winter months, how will this impact your job or existing business? Do you have a plan to make sure that you still have a means of earning income (if necessary) during the rest of the year?
5. How Will You Finance Your Seasonal Franchise?
Another key consideration is how you will finance your seasonal franchise. While there are several options, it is important to carefully weigh your options and choose the one that makes the most sense for your personal financial circumstances. If you qualify for an SBA loan or the IFA’s VetFran Program, this could be your best option. But this isn’t necessarily the case, and you will want to consider all of your alternatives before deciding how to move forward with financing your seasonal franchise opportunity.
6. What if Your Seasonal Franchise Isn’t Successful?
Hopefully, your seasonal franchise will succeed—but what if it doesn’t? If your seasonal franchise isn’t successful, will you be able to manage financially? What does the franchise agreement say about early termination and “lost future royalties”? Making sure you know the answers to these types of questions is critical for making an informed buying decision as well.
7. Will You Receive an Exclusive or Protected Territory?
The market for seasonal holiday products and services is highly competitive in many areas. If you are already facing intense competition, the last thing you want is to face competition from within your own brand. While some franchisors offer exclusive or protected territories, others do not. When reviewing your franchise agreement, the “Territory” provision (if there is one) is one that you will want to examine very carefully. If you won’t receive protected or exclusive rights, this is another factor that you will need to consider carefully when deciding whether it makes sense to move forward.
8. What Are the Other Terms of the Franchise Agreement?
Along with early termination, “lost future royalties” and territorial protections (if any), there are numerous other key franchise agreement provisions that require careful consideration. These include (but are by no means limited to) terms such as:
- Initial Term and Renewal
- Royalty Fees and Advertising Fund Contributions
- Hours of Operation and Other Operational Standards
- Mandatory Suppliers
- Jurisdiction, Legal Fees, and Mandatory Mediation or Arbitration (or Both)
When you hire an experienced franchise lawyer to represent you, your lawyer will carefully review all of the franchise agreement’s provisions and explain everything you need to know. Then, by combining this information with your own financial analysis and due diligence, you should be able to make an informed buying decision.
9. Is There a Better Opportunity Out There?
Today, there are more franchises than ever. This includes seasonal franchises. Even if you have a particular interest in a specific seasonal franchise opportunity, it will be worth doing some comparative research to find out if the franchisor’s terms and conditions are in line with industry standards. Your franchise lawyer will be able to assist with this as well.
10. Are You Confident that You Are Making an Informed Buying Decision?
Ultimately, if you are considering a seasonal franchise opportunity, the key is to ensure that you are making an informed buying decision. While there are no guarantees, you can increase your chances of success by doing the legwork to put yourself in a good starting position. Again, an experienced franchise lawyer can help, and hiring a lawyer to help you make a sound investment decision is well worth it.
Request a Free Initial Consultation with Franchise Lawyer Jeffrey M. Goldstein
Are you considering a seasonal franchise opportunity? If so, we invite you to get in touch. To schedule a free initial consultation with franchise lawyer Jeffrey M. Goldstein, please call 202-293-3947 or request an appointment online today.
