For many people, the desire to own a franchise stems from a desire to be their own boss. They’ve been an employee for years, perhaps decades, and they are ready to take control of an outlet of their own. If you are thinking about transitioning from employee to franchisee, what is your first step? National franchisee attorney Jeffrey M. Goldstein explains.
What is Your First Step Toward Buying a Franchise?
There are lots of potential places to start when buying a franchise. But, as a practical matter, the best place to start is with an assessment of your finances. Are you financially capable of buying a franchise?
If you don’t have the financial wherewithal to buy a franchise, then this will be your last step as well. So, before you go through the effort of evaluating franchise opportunities and hiring a lawyer to review the Franchise Disclosure Document (FDD) and franchise agreement, you first need to make sure you are financially prepared to move forward.
How much money do you need to buy a franchise? There isn’t a single “right” answer. But, there are some overarching considerations:
- If you will quit your job before your franchise opens, do you have enough savings to cover your living expenses in the interim?
- Do you also have enough savings to cover your living expenses during the first 6 to 12 months of your franchise’s operation?
- Do you qualify for financing? If so, how much can you reasonably borrow and make your loan payments while still covering your franchise’s expenses and (eventually) paying yourself a reasonable salary?
If you cannot comfortably afford to buy a franchise, then you will need to think seriously about whether you are willing to take on the risks of franchise ownership. Buying a franchise is a long-term investment; and, if your franchise isn’t successful, you could easily end up in debt and on the job market once again.
Making the Decision to Move Forward
This discussion is not meant to scare employees away from making the transition to franchise ownership. Lots of employees do it, and many of them are successful. Rather, this discussion is intended to ensure that employees who are considering franchise ownership start the process on solid financial footing. If you are ready, you should move forward. But, if you aren’t ready, you should wait until you are.
Lots of first-time franchise buyers rely on financing. There are several financing options for first-time franchisees, including government-backed loans through the U.S. Small Business Administration (SBA). Just like making the right decision about buying a franchise, making the right decision about financing is extremely important, and prospective franchisees should consider all of their options before choosing how they will proceed.
Contact National Franchisee Attorney Jeffrey M. Goldstein
If you are thinking about making the transition from employee to franchisee and would like to know more about the steps involved, we encourage you to contact us for a free initial consultation. To speak with national franchisee attorney Jeffrey M. Goldstein in confidence, please call 202-293-3947 or request an appointment online today.
