Buying A Franchise featuring Sport Clips

Buying A Franchise featuring Sport Clips


(techno music) – Buying a franchise. Welcome to Bloomberg on
Demand, The Business of Life, I’m Carol Biaggi. Subway, Dunkin’ Donuts, H&R Block, the UPS store, they’re just a few of
the 3,000 U.S. companies that sell franchises. A franchise lets people
own and run a business, without all the risks
of a typical start-up. And that model makes
sense for many would-be entrepreneurs. – It just appealed to me, the passion I heard in the
voices of the franchisors and just getting in on the ground floor of a very cool concept. – There’s people that have
already been successful in this business and
already have those things already set up. – When I mention Dunkin’
Donuts, it helps us get a start right away, versus me starting, Mitch’s Coffee Shop. – But entering the franchise world involves plenty of risks,
hard work, and costs. Step one in your due
diligence is getting a copy of the franchise disclosure document, known as the FDD. – It gives full disclosure of all fee’s and costs associated with getting into that franchise system. – Cost’s are typically
found in Item 5 to Item 7. – The onetime franchise
fee ranges from $10,000 to $50,000, but total costs
to start a retail franchise can easily exceed $200,000
when you add equipment, inventory, and real estate. Financing ranks number
one on perspective buyers list of concerns. People who don’t have
enough personal savings, turn to banks and other lenders, who have tightened
standards in recent years. Lenders often rely on the
Small Business Administration to guarantee a portion of the loan amount. – Franchisees but in 30%, $60,000. So, know he has $140,000 leftover. SBA will come in, provide
that $140,000 loan guarantee. – Checking the default rate
of a franchise company’s SBA backed loans, will give you some idea of a brands track record and the FDD has plenty of other clues. – Some areas of focus,
clearly would be Item 20, kinda a snapshot of the units
summary of store openings, store closures, terminations. Look in the back of
the franchise agreement for perspective franchisee’s
to call and contact existing and franchisee’s
that left the system. – If you make a hundred phone calls, make a hundred phone calls. You’ll hear trends and if you’re getting a strong theme of, this
franchisor doesn’t support, if I knew what I know today,
I wouldn’t have done this. – If you see a lot of litigation, outstanding conflicts
between the franchisor franchisee’s, that should be an alarm. You wanna look inside that
resume, snapshot of the franchisor and find
out, do they really have good experience and history
in operating the system. – Experts say the key
is finding a franchisor who helps you succeed. – You have a support
every step of the way, they’ve secured discounts
from vendors for me, which more or less
offsets the royalty cost. – There’s never been a
successful franchisor without successful franchisee’s. – For more information, go to the websites of the, International Franchise Association, Franchoice, or the Small Business Administration. Thanks for watching, Bloomberg on Demand, The Business of Life. I’m Carol Biaggi.

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