Purchasing a Franchise: A How-to Guide
The following five-step guide is a road map to help entrepreneurs and investors successfully navigate the path to purchasing a franchise with Relax The Back.
Step 1: Determine your assets and evaluate your financial position
Nearly every franchising company requires potential franchisees to demonstrate a minimum level of capital assets. This requirement varies widely, depending upon the industry and type of franchise you're purchasing. The asset requirements for Relax The Back range from $247,500 to $401,500, with a realistic estimated total of $340,000 for a turn-key start up.
The other aspect of this issue relates to your overall financial position. Ask yourself: can you afford to purchase the franchise, fund all the steps necessary to launch the business and support you and your family until the business begins to make a profit? If you're a seasoned investor with extensive assets in reserve, this may not be an issue. However, make sure you have enough money to sustain yourself until the business begins to make a return. Keep in mind, this may not be overnight.
Step 2: Learn more about Relax The Back
Examine our financial prospectus and investigate our performance figures. Review our franchising program, and determine all of the initial and ongoing fees and costs. Make sure to ask any questions you have about ongoing support services. Feel free to speak with our other franchisees and ask about their experiences. Ask them to evaluate the pros and cons of the business. Take the information you've collected to a qualified professional business advisor (a third party) and ask their opinion on whether your selection appears to be a sound investment opportunity.
These evaluations are of particular importance if you plan to secure financing to purchase a Relax The Back franchise.
To further help with your decision, we offer a "discovery day" at Relax The Back headquarters in La Palma, CA. This is when you are especially invited to come to our offices and meet the people behind Relax The Back. "Discovery day" is set aside so you can ask any questions, meet personnel and learn more about our products and vendors. You'll get an inside look at our business model, our marketing techniques and the support services we offer to all our franchisees. At discovery day, you can see for yourself why we've been a leader in the ergonomic products industry since 1984.
Step 3: Draft a Business Plan
Generally speaking, the first step in launching any new business is the creation of a business plan. With Relax The Back, you acquire much of the information necessary to draft a business plan through your research into our company. Your business plan should be a comprehensive analysis of the business from the ground up. The plan includes: a complete description of all logistical requirements necessary to launch the business; a detailed review of costs and capital requirements to start and sustain the business; and progress/status projections for the end of years one, two and three. The plan also incorporates a complete marketing analysis with an outline of market conditions in the area the business is to be located and list of your competitors.
Creating a business plan serves several functions. First of all, it requires that you take a critical look at our business. This process often uncovers aspects of the industry you may not have been aware of, which can help you plan for contingencies in the future. Additionally, if you hope to obtain financing for your new business, lenders require a comprehensive business plan.
Step 4: Acquire a Franchising Attorney
Due to its unique nature, using an attorney that specializes in franchising is highly recommended. Contact your state bar association or the American Bar Association; both entities have resources to help you locate an attorney in your area that specializes in franchise purchases.
Step 5: Finalizing the Franchise Agreement
The Franchise Agreement is the final step in the franchise purchase process. Your finances are in order, your research and due diligence is done, your business plan is complete and you've acquired a franchising attorney. Now it's time to sit down and finalize all the details, in writing. The Franchise Agreement serves as the blueprint for your relationship with Relax The Back. You should never sign an agreement, or pay any type of deposit, before conducting a meticulous review of this agreement. There are six primary provisions that should be specifically defined in the Franchise Agreement:
Fees
Fees includes the initial purchase fee in addition to all ongoing fees covering licensing, royalties, trademarks, advertising and any other franchising expenses.
Territory
Your protected territory should be specifically outlined.
Support
Support governs all training, logistical, real estate, business management, accounting and marketing/advertising support provided by the franchisor.
Obligations
Obligations define the basic standard of service franchisees must adhere to in operating the franchise business. This includes all restrictions and limitations as to what a franchisee can and cannot do in the representation of the franchise.
Term
The length of the initial term and options to renew the Franchise Agreement (after the initial expiration) should be specifically defined.
Cancellation/Termination
If, for whatever reason, you're unable to continue operating the business, you should understand the agreement as it pertains to cancellation or termination. This portion of the agreement includes the financial liabilities of both parties in the event the Franchise Agreement is cancelled or terminated.
