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Franchising 101: Taking over a company-owned outlet
Apr 29, 2013
Q: I am applying for a franchise of an ink refilling station. Initially, the franchiser is offering me an outlet which is currently company-owned, in a location that's a bit far from the general vicinity I'm thinking of. I think I can adjust if it's just a location issue (as long as there is market potential). But I want to know the advantages and disadvantages of acquiring a franchise that used to be company-owned. How does that compare with constructing a new outlet?
A: First of all, the location plays a role in your interest in the franchise. Having a place which as you said is "a bit far" may not be suitable for you. Do consider the following:
- your travel time and ability to be take active role in the day-to-day management of the business
- your familiarity with the community environment
If it is company-owned, I would advise you to:
- Review the financial history of the site branch from day one to the present
- Be at the site and observe not just for a day but cover at least a seven-day period to study the peak hours
- Check the other potential and steady income streams
- Don't forget the competition in the area
If, after observing, you feel confident that you can make the necessary adjustments, then proceed with the offer. You may also want to check if the present staff can be absorbed. If the franchisor is willing to transfer the staff to you, interview them. Remember, they will be your employees and you have to know if you can work with them.
The primary advantage of acquiring a company-owned outlet is the fact that it already has an established market. The franchisor already took the risk of operating the store from the beginning. In comparison, a franchisee who will just start the operation of a new branch will be the one to face the startup risks.
Armando ( Butz) O. Bartolome, the Philippines' Franchise Guru, is currently President of GMB Franchise Developers, the pioneer franchise development company in the country and is behind the growth and expansion of over 200 local companies. You may reach him at firstname.lastname@example.org.
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