Franchising is today's most common way of starting a business. When conditions are favorable, it is a win-win scenario for both the franchisor and its franchisees. The franchisor is given the opportunity to enter new market areas and the chance to gain more sales and profits, while franchisees are given adequate territory to earn desired revenues without undue competition from fellow franchisees. Learning how to start a business and make money is the primary objective in a franchise. |
In the franchise industry, there are issues that must be settled. One common complaint today originates from franchisees of big franchise systems. Franchisors sometimes get franchises to operate near each other. As a result, the territory of each is diminished and a significant drop in sales might occur.
A group of franchisees recently filed an encroachment lawsuit against their fast food franchise system. The case was dismissed for according to the judge; the written franchise contract came before the franchisees' argument that they had been orally promised exclusive territories from the franchisor. The issue of territory needs a resolution.
Prospective franchisee's best interest is to seek out franchises that offer protected and exclusive territory rights within a designated geographic area. Studies made by the Institute for Operations Research and the Management Sciences shows that 91 percent of successful franchises have defined territories. On the issue of how to start a business in franchising, be sure to get exclusivity on a defined area to make money without too many competitors nearby.
In dealing with the franchisor, a franchisee must ask questions and get satisfactory answers. For example, "Will the territory be exclusive or is it going to be non-exclusive?" How are the franchise territories determined? Are there disclosures on the territory granted? Are the precise boundaries clearly defined? Are there any minimum sales quotas or conditions imposed on franchisees in order for them to retain territorial rights?
When a franchisor gives a verbal assurance of exclusivity of territory, be sure to have these terms reflected in the UFOC or franchise agreement, and be sure be to get confirmation in writing. Settle any concerns about franchise territory before purchasing the franchise. When important concerns are being addressed at the onset, future conflicts and legal charges are avoided. Remember that inadequate territory protection or rights can significantly hinder your chances of profiting and succeeding in the business.
Among lessons learned on how to start a business in franchising is the importance of an exclusive territory. A franchisee can make money when the business is secured by a written franchise agreement.
Mike Moore is published on more than 300 websites. He writes success and business articles that cover topics from home based business, business start up, and franchise success . He is published on various website including http://www.franchiseharbor.com
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