Robert Zarco: How To Evaluate A Franchise Opportunity

Editor’s Note: The “Legal Franchise King” and Haute Lawyer partner Robert Zarco, Founding Partner of Zarco Einhorn Salkowski & Brito, P.A. on how to determine if opening a franchise is for you.

Robert Zarco - shutterstock_1763188961Photo Credit: Shutterstock

Franchises are a tried and tested way to start a business that is more likely to be profitable. When starting a business from scratch, you’ll need to conduct thorough market research, create a brand strategy, set up sourcing, and essentially adopt a trial and error approach to many aspects of the business. The benefit of a franchise is that all of the groundwork has already been conducted – the business idea works, and it can theoretically be replicated in different locations with generally the same profit margins.

While franchises can present enormous opportunities, however, they are not foolproof and you should always conduct due diligence before making a commitment. The following are key considerations to make before buying a franchise and becoming a franchisee.

Will this franchise work for your defined market?

While the franchise owners may have seen huge amounts of success in their particular markets, you cannot assume that starting the same franchise in a different location will be equally as successful and profitable. Make sure that you understand the differences in customer demographics and local competition within the market that you want to set up in and question viability from many different standpoints.

What is the level of investment?

You’ll need to invest a certain amount as determined by agreement with the franchisor before becoming a franchisee. You’ll also need to have enough liquid working capital for cash flow to make the franchise a success in the short term, otherwise, you’ll be prone to failure.

What training and support is available?

Make sure that you are getting enough from the franchisor in order for it to be worth your while. You should be comfortable that you’ll be properly trained by the franchisor and that you’ll be able to learn from their experiences and guidance.  Running the operation of the business properly in all aspects will make all the difference in determining its success. This is where effective training from the franchisor and prior business experience from the franchisee is important.

What is the exit strategy?

Always make sure you’ll be able to get out of the operation if things don’t go to plan. This includes your commitment to the franchisor, the landlord, and others as well as how to sell to recoup your investment if possible. Also, make sure you know what procedure you will implement in the event that you become sick or have a personal crisis. If you are considering committing to a franchise instead of setting up a business from scratch, it is important that you have a full understanding of the law so that you are protected financially.

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