Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
To many small business owners, a franchise sounds like the best of both worlds: You’re starting a small business on your own, but you’re not going it alone.
Many business owners have built mini-empires by affiliating with franchisors instead of trying to build a brand from scratch. Franchising is a unique business arrangement, however, and it requires careful vetting.
A franchise typically involves two parties:
Your experience—as a manager at a large company or as a small business owner—may or may not be relevant to a prospective franchise opportunity. The best way to use your business smarts is to research every aspect of a possible franchise opportunity and draw your own conclusions about its potential. The following five questions can help you identify your business goals and assist you in deciding whether you should consider looking at a franchise opportunity as a means to achieve those goals.
1. Does the business concept have real growth potential?
Explore the overall growth potential for the franchise concept based on demographics, market trends, and consumer preferences independent of what the franchisor projects.
You need to consider each of these items with your business advisor or partner and make sure you understand each of them to evaluate any franchise concept.
2. What is the track record of both the franchise and the franchise owner?
You’ll want to interview other franchisees within the same system to find out if their businesses are operating as they planned. Consider hiring a lawyer who specializes in franchises to review the contract and any other documentation given to you. You should also obtain as much information as possible about the franchise and its owners to see what, if any, information comes up about issues other people have had or any history of shutting down franchises and leaving franchisees in the lurch. You can get help on both fronts from the American Association of Franchisees and Dealers.
3. What is the financial structure?
By definition, when you buy a franchise, you are buying into a system—not just once but also through regular royalty payments. Often, royalties you pay to the franchisor are computed on gross income of the franchise you have purchased. That means that you pay the franchisor before the landlord, your suppliers, your employees, and yourself.
Often, franchisees are required to use suppliers approved by the franchisor—and often the franchisor owns those suppliers. You might be required to attend conferences or participate in marketing activities with associated expenses on top of the royalty. All of these requirements may become major sources of outgoing cash flow.
4. How will you finance the purchase of the franchise and business start-up?
Some franchises require a large upfront payment. If you decide to move forward with a franchise purchase, you need to know how you will pay for it. Some franchisors may finance your purchase of the franchise business, but in other situations you will have to obtain a loan.
Depending on the amount of money you need to borrow to buy into the franchise, you might have to guarantee the loan you take out for the initial investment. Consider hiring a certified public accountant that is experienced with franchise finance to give you unbiased advice.
The Small Business Administration (SBA) is another excellent source of information and funding for your new business—make sure to review the SBA’s data on franchises, including the default rates of SBA-guaranteed loans. In addition, the Federal Trade Commission offers a comprehensive consumer guide to buying a franchise.
5. What is your exit plan?
If you become a franchise owner, you will need to know your options for leaving the franchise and moving on, whether you eventually decide to sell your franchise business or simply close it down. You may also want to know how hard would it be to take what you have learned and convert the franchise to a freestanding operation with a similar or related business.
Because franchise agreements can be quite long and detailed, be sure to ask your lawyer and accountant to sketch out scenarios for selling your business and business operation, should this situation arise.
The most important factor when deciding whether to franchise is you. Are you comfortable following someone else’s rules and supporting the franchisor’s vision? Or does the very idea of having a third party control much of your business make you have second thoughts?
Each franchise system has its own culture. Some are rigid; others invite innovation. Getting to know potential fellow franchisees will clue you in about the culture and help you size up the fit.
Joanne Cleaver doesn’t just write about entrepreneurship and finance for national publications and websites. As a longtime freelance writer and editorial project manager, she lives it. Her most recent book is “The Career Lattice” (McGraw Professional, 2012), which shows how lateral moves power career growth.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.