If you’ve ever made a large purchase or written a big check, there’s that deep breath you take, the gulp and the nervous stomach. Totally understandable. It’s a big moment. The same is true when you have your sights set on a franchise business ownership opportunity. The day will come when you must sign the franchise agreement, essentially sealing the deal, and nervousness is expected.
Although you may be new and unfamiliar with franchising, rest assured, by time you get to the part of your journey, when you sign on the dotted line, you should be more than ready if you are signing up with the right franchise system. Let’s go through the process to understand the commitment you’re making.
What Are Franchise Agreements?
Sometimes dubbed, “the Bible of the franchising industry,” the franchise agreement is a binding legal document between a franchisor and a franchisee. It is a detailed account of the relationship between the two parties including: expectations, obligations, permissions and restrictions for operating the franchise. Anything that had previously been a handshake must now be legally put in writing and signed by both parties.
Franchise Fees and Investment Expectations
Included in the franchise agreement is a comprehensive fee schedule that the franchisee pays to the franchisor, including amounts or percentages and the frequency of payments. Most franchisors require a royalty, which is a percentage of gross/net sales or revenue or a flat fee. Be very clear about this section.
You’ll pay a franchise fee which is a one-time upfront payment paid to the franchisor when you sign the franchise agreement. This puts you in business. It gives you the rights to use the brand name and systems.
There are initial start-up fees that will be the build-out of your franchise location, if applicable. This can sometimes include real estate, construction costs, equipment, inventory, licensing and permits. This is dependent on the type of franchise you will own. All fees vary by brand.
By law, franchisors must provide franchisees with a franchise disclosure document (FDD) 14 days prior to signing, to review before any money is exchanged. The Federal Trade Commission is the consumer protection agency that polices these transactions and requires franchisors to be very transparent with franchisees.
In order to be recognized as a franchisee, there must be a minimum of $500 paid as a franchise fee, although for most brands, this fee is much higher. This allows the franchisee to use the trademarked name, logos and intellectual property. And the franchisee will be provided a marketing system or method of operations.
Here’s what’s important to remember, franchise agreements are written to protect the best interests of the franchisor and franchise system as a whole. There is not much wiggle room. Established franchisors have a proven system in place, no need to reinvent the wheel, so there is little to no flexibility. If an item is important to you, try negotiating, but remember, the whole point of franchising is that you pay a fee for use of a proven business model which you can profit from.
But let’s back up a minute. Before you get to this point, you’ve completed research and due diligence and you are not entering this agreement blindly. You’ve chosen a brand that aligns with your wheelhouse and/or interests. You are satisfied with the projected ROI. You understand the rate of growth the franchise has experienced. You’ve attended “Discovery Day.” You’ve had an attorney and accountant advise you about the FDD. Plus, if you’re thorough, your research includes talking with other franchisees of the brand, to get their take on this franchise model.
Once you get to the franchise agreement signature stage, you know what you’re getting into. From the minute the ink hits the page, any forthcoming issues are dealt with through the contract.
What to Look Out For
Although you received legal guidance, there are a few red lights to look out for.
- You want to know exactly who is signing the agreement from the franchise. Is it the parent corporation or a master license owner?
- Are you aware of the length of the commitment? Is this a 10-year relationship? Is it renewable? Can you sell it? Can you pass it down to your children? Is there an exit clause? Often if you shut down a franchise early you may have to pay liquidated damages for breaking the contract. Find out before you sign anything.
- Have you been awarded an exclusive territory? You’ll want to know where you stand with the competition.
- Will you be given assistance with your grand opening, marketing, or staffing? What is the training and support included? Reputable franchises have laid all this out for you, but if you have any doubts or questions, find out before signing the franchise agreement.
Come Join Our Flock
At Wild Birds Unlimited we make sure this business opportunity is beneficial for both of us. We want you to be happy as an owner, which is why we make sure this is a good fit. We’ve been franchising for 40 years and understand questions, concerns and nervousness you might experience joining a franchise system. That’s why we ensure that by time you get to signing the franchise agreement, you feel very comfortable with your decision.
To complete the discovery process for becoming a Wild Birds Unlimited franchise store owner, you should estimate spending about 45-60 days with our development team. If we determine that Wild Birds Unlimited is the right fit for you, you will be invited to sign a Franchise Agreement. From there, we will begin the site selection process to identify your retail location. We want this experience to be exciting, not stressful.
Wild Birds Unlimited is an outdoor wildlife franchise dedicated to meeting the growing consumer wildlife hobbyist demand. This business is designed to bring joy to you as an owner and to the community you serve. We are confident that if you come fly with us, signing the franchise agreement will be the start if a great business relationship for both of us.
If you want to learn more about joining our flock, fill out this form and let’s get started.