Franchising looks like a great deal when you consider all the help you’re having, the training, the assistance in building your location, and the established reputation that people can trust. The thing for every franchisee to remember when they purchase a franchise is that they do not own a business. When someone purchases a Dollar Store franchise, they do not own Dollar Store, it’s logo, its services, or its image. They also do not known the operating methods or special features unique to that franchise (like recipes in a restaurant). They have purchased the royalties, the permission to use an idea that belongs to someone else. What franchisees do won are the physical aspects such as the property and equipment. You should always read the contract closely when you sign with a franchisor as many franchisors reserve the right to purchase back any physical assets that you own if your working relationship were to end.
While all that might sound a bit frightening and you may be rethinking franchising as an option, it’s important to recognize all the perks that will come with good franchisors and some of those things will be:
Protected territory is a perk that many franchisors will often give their franchisees. These are locations where no other company-owned or franchise-owned are allowed to place and detract from your business. Protected territory can help by providing limits on the radius of another business or household to yours, through zip codes, how many people leave in the area, boundaries by the highway, and company-specific rules.
Keep in mind that if a territory, city, or area is too large, a single store may not be enough to achieve brand recognition there. On the other side of that coin, if the area is too small, the community may not be able to support the business of more than one store. This can either work for or against your favor. This is another way in how a franchisor can help a franchisee. He can provide the business owner with the information on a certain area and what the community will be able to support. A knowledgeable franchisor will be able to prevent encroachment for any of their franchisees—that is, the negative effect on sales that can be caused by there being too many nearby units.
Territory rights aren’t always as open as one may think. Some franchisors will be more specific because some locations cost more to build in. Some franchisors may want to see results before they permit a franchisee to build in a certain place or they may put a time limit on how long a franchisee may be in that location—again, often based on one’s success or contract.
As is important with any contract, remember to read it carefully and make sure you understand it before signing it. Consult a lawyer for a more thorough read through before you make any large commitments.