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Franchise buying lesson

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  • 1. VIETNAM FRANCHISE DEVELOPMENT SOLUTION
  • 2. FRANCHISING, ESSENTIAL MATTERS WHEN BUYING A FRANCHISE
  • 3. 1. EVALUATE YOURSELF 2. SELECT BRAND 3. FRANCHISE AGREEMENT NEGOTIATION CONTENT
  • 4. EVALUTAE YOURSELF Franchise is the great way to start your own business be your own boss, you don’t just have a job but have a future. Here are something you should consider before you plunge into a franchise business
  • 5. 1. Consider what is your objective and how the franchise help you to achieve your goals. There are 3 types of franchise ownership: Active ownership, Passive ownership, Semi- active ownership EVALUTAE YOURSELF
  • 6. 2. Consider time commitment you have to make to the franchise. Note that sometime the franchisor may have a certain business hour time requirement EVALUTAE YOURSELF
  • 7. 3. Consider how long your business can be profitable. Your goal is to achieve your financial independence. Most of the time, the franchise will be able to start immediately. However revenue and profitable are two difference things EVALUATE YOURSELF
  • 8. 4. Consider what are your territories. If you become successful, you may want to expand your business. However it will be too late at the time when you realize the territory limitations EVALUATE YOURSELF
  • 9. SELECT YOUR BRAND 1. Your first step should be to determine what industry your franchise will be in 2. Your knowledge of a particular industry will give you valuable insight into how to run your franchise and maximize profit 3. In contrast, some entrepreneurs choose to buy franchises in industries they have no experience in, often because they have a passion for a particular market. 4. If you are having trouble finding a franchise that is a good match for your skill set and interests, take a step back. Are you sure franchising is right for you?
  • 10. Area Franchise Agreement (AFA) discussion should be a very defense negotiation. There are a lot threaten in AFA which you must recognize and avoid and protect your future. You must be vigilant about knowing and fulfilling your own duties NEGOTIATE FRANCHISE AGREEMENT
  • 11. “Most of franchisor say that : Initial franchise fee, royalty fee, minimum royalty are un-negotiable – BUT YOU CAN NEGOTIATE ” 1. Initial Franchise fee, royalty fee, minimum royalty NEGOTIATE FRANCHISE AGREEMENT
  • 12. Read the company's disclosure document. This document should tell you business background, litigation history, bankruptcy history, costs, restrictions, grounds for termination of the agreement, training and support information, advertising information, earnings potential, financial history, and current and former franchise information. Make sure you read the entire document and that you understand it. Give a copy to your attorney as well 2. Disclosure document NEGOTIATE FRANCHISE AGREEMENT
  • 13. be sure that the duration of the Franchise Agreement is clearly stipulated. How long does it last – five, ten, or twenty years? Is it renewable when the initial contract expires? If the contract is renewable, how much will you have to pay? Is it a nominal fee or the full franchise fee? 3. Duration of the agreement NEGOTIATE FRANCHISE AGREEMENT
  • 14. How much control does the franchisor exert over selling or transferring your individual franchise business? Doe the franchisor have approval/veto rights over prospective buyers? What percentage of the sale is the franchisor entitled to, and when must it be paid? Basically, this aspect of the contract dictates how, when and under what conditions you can sell the business. It is always wise to have a good exit plan before investing in anything, so know what your rights and obligations are in regard to selling the franchise business. 4. Selling or Transferring your franchise NEGOTIATE FRANCHISE AGREEMENT
  • 15. How much control does the franchisor exert over selling or transferring your individual franchise business? Doe the franchisor have approval/veto rights over prospective buyers? What percentage of the sale is the franchisor entitled to, and when must it be paid? Basically, this aspect of the contract dictates how, when and under what conditions you can sell the business. It is always wise to have a good exit plan before investing in anything, so know what your rights and obligations are in regard to selling the franchise business. 5. Termination of the agreement NEGOTIATE FRANCHISE AGREEMENT
  • 16. You want your advisers to work with you to help you find potential errors, omission. Their greatest value is that they do not have the same vested interested that you have. They are not buying the business themselves but helping you to buy a business . By working with them you get an independent third-party perspective. They have no emotional ties in the transaction and are free to speak from an unemotional perspective. 6. Advisers provide perspective NEGOTIATE FRANCHISE AGREEMENT
  • 17. THANK YOU

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