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What to know about being a franchisee

| Feb 12, 2024 | Business Formation, Business Litigation |

Starting your own business in Texas can be an effective way to control or grow your career. However, running any type of business means understanding consumer and customer habits, state and federal employment laws and other important matters. You may also need to make a significant financial investment if you want to become a franchisee, which means that you will need to think carefully before deciding to go in that direction.

The cost of being a franchisee

The initial franchise fee can cost as much as $100,000 or more, but it is just one of many expenses that you’ll likely incur. In addition, you may need to pay for marketing materials, uniforms and the actual goods that you sell to your customers. Depending on the terms of the franchise agreement, you might also need to factor in the cost of occupying a building, procuring equipment and any additional maintenance.

Nothing is guaranteed

One of the benefits of buying a franchise is that you get to tap into the goodwill associated with an established brand. However, you still must run your business properly if you want to be profitable. Furthermore, if you fail to do your market research, you might choose a location with unfavorable demographics. You also have the potential to fall victim to changing economic conditions or consumer/customer preferences.

Don’t skip the due diligence

The due diligence process enables you to learn more about a company, an industry and anything else that you need to know before investing your time, energy and money. Ideally, you will talk to the franchisor to learn about any pending lawsuits or other business law issues that you will need to deal with after the transaction closes. You will also want to independently investigate these issues. You can also talk to existing franchisees and their employees or customers to determine why a brand is successful and determine the likelihood of you replicated their success for yourself.

Owning a business means sacrificing time, energy and money in the hopes of creating long-term financial security. Doing your due diligence can make it easier to choose a business and industry that you can thrive in for the next several decades of your career.