By Rob Lancit
If you’ve always dreamed of branching out and starting your own business, then purchasing a franchise may be a worthwhile venture. As a franchise owner, you will have access to a brand name and a business model that already has a proven track record—and, in many cases, the kinks have already been worked out of the marketing plan.
When you enter into a franchise agreement, you are being handed a proven investment opportunity that rarely fails, since it is based on a blueprint that is already successful. The franchisor has already done the legwork to ensure the growing pains experienced by independent startups are out of the equations, and that there is a market for the products.
In terms of a startup operation, a franchise presents considerably less risk than going it alone, because you will not be experimenting with the trial and error phase all newly established businesses have to go through. Thanks to your franchisor, you will already know what works and will have a leg up on the competition as you establish your business.
That said, the success of your franchise business ultimately depends on you. The franchisor may provide a blueprint, but you must build and maintain your franchise yourself. Even with a well-established business and head office support, there are several day-to-day tasks every successful franchisee must handle on his or her own.
Accounting and bookkeeping
While your franchisor will guide you during your initial startup phase, you will be responsible for keeping records of all the money that comes in to—and goes out of—your franchise. This will include taking detailed notes about the cost of supplies, employee training and any other additional money your franchise makes. You will be solely responsible for the payroll obligations to your own employees.
As a franchisee, it is important to keep a close watch on your bottom line and track your net profits. You alone will be responsible for not only keeping your business adequately backed with funding for all ongoing costs, but also for paying your ongoing royalties to the franchisor.
The royalty fee you will be required to pay should be outlined in your franchise agreement. This is an ongoing payment that comes out of your gross income, and is completely separate from the franchise fee (a one-time payment that essentially allows you to use the franchisor’s trademark names, products and images).
Some franchisors provide tools such as bookkeeping software to help you keep track of your receivables. However, while software can track where the money is, it cannot provide guidance. Unless you have the proper training to do your own accounting, it is generally advisable to hire an accountant for your franchise. This will make it easier to keep detailed records, while keeping you free to run the rest of the business.
Look for an accountant you can trust who has small business experience; you can talk to your franchisor or fellow franchisees for recommendations. Typically, it is easier to hire one accountant and stick with him or her, versus hiring a separate one each tax season. A good accountant can be your tax planner, business adviser and networker. Having someone you trust to guide you over the years will prove quite valuable over the years.