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Franchise
Investing, Franchise Opportunities and Franchising Renewals Have you considered
buying a franchise instead of trying to start a business from scratch. Many
franchise agreements are renewed every five or ten years, automatically. If
you do not want to renew your franchise you need to let the franchisor know a
little bit in advance as it generally states in the Uniform Franchise
Offering Circular (UFOC) The franchise Disclosure Document used in
franchising. Most require that you out it writing so there is no question
about your intent, some require this 180 days before expiration. Others state that if
you do not specifically say you do not wish to renew the agreement you are
automatically renewed. If you do not want to renew your franchise at the end
of the five year period, that is ok, but there are generally stipulations
after termination. You cannot simply change the “Burger King Hamburger” sign
out front to Joe’s Burgers and keep operating (example only). You can decide not to
renew but many franchise attorneys might suggest rather than just not renew;
that you transfer your franchise to a new buyer and get the money out of your
business that you deserve for building up the franchise. Example: If you have
built up your business and you are doing one million dollars a year, just under
100,000 dollars a month, finding a buyer should not be a problem. Then you would be
compensated for building the business up to that point or maintaining it at
that level. Many businesses sell for a multiple of of their gross sales and a
business broker can give you an appraisal. If your business is small and lets
say doing one hundred thousand dollars gross a year, you may wish to sell
your business for an additional fifty thousand dollars above and beyond the
value of your equipment. In other words, whatever the equipment is worth plus
fifty thousand dollars. (example only). The franchisor may
help you find a buyer or you may find a buyer yourself, sometimes the
franchisor may charge you a fee from renewal and this is quite typical as
they have real costs of screening and training the new franchisee. But you
need to understand that not renewing your contract will cost you money. You will lose your
original investment. At the end of five years if you have run your business exactly
how we have shown and you qualify for renewal, but you decide you do not want
to run your business anymore, the franchisor may be glad to buy your business
at a fair price or make you and offer. Some franchise agreements require that
the franchisor has the first right to purchase or first right of refusal,
some require both. Of course if you
don’t follow the franchisor’s confidential operations manual and continually
violate the standards of the franchise you will not qualify for renewal at
all, you might be terminated completely and not able to sell your business,
which in franchising we call transfer, because you do not actually own the
business, you are basically leasing it and using your business acumen to
derive an income for your hard work in promoting the franchisors brand name. Before you buy a
franchise consult an attorney so you know what you are buying, even though
most attorneys are considered scoundrels and parasites of our great nation as
they steal the productivity from America and produce nothing in return;
causing a complete melt down of our great civilization while destroying all
we are and all we have built. Think about it.
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