By AnnaBeth Rouse
Franchises, in general, are great investment opportunities for individuals who want to become entrepreneurs or have a desire to add to their portfolio. Historically, franchise opportunities offer unique benefits and support that are crucial for new business owners.
Real estate franchises offer the benefits of an established and recognizable brand. Reputable franchises also offer extended support to franchisees to ensure their success. As international real estate franchises have become one of the hottest trends in recent years, here are some things to consider when reviewing real estate investment opportunities:
Initial Investment Required
The first concern for any potential opportunity is the amount of money required to make the initial investment. A franchise opportunity may come with lending terms, or the franchisee may be required to fund the initial investment all on their own. This consideration should be discussed openly and early in the research process. Business seekers who are not cautious with the initial franchise investment are only setting themselves up for problems down the road.
Potential Financing Terms
If the liquid assets an investor has available is insufficient to cover the total cost of an initial real estate franchise investment, they have several options available. Private investors and angel investors may offer to front a specific sum toward the initial startup costs. Small business loans are available from banks and other potential lenders. Each of these opportunities will require full disclosure of business documents, a business plan and repayment terms.
Many traditional banks are wary of lending funds for franchise opportunities because of restrictions in place by the franchise's corporate executive staff. Interest rates and terms will vary based on individual consumer credit reports, business credit information and the reputation of the franchise. Some franchises will fund all or a portion of the start-up costs for new franchisees.
A concern that's unique to franchise agreements, but may not impact other business opportunities, is the location of the business. Some franchises are very strict about open territories. Real estate franchises cover specific geographical locations and overlapping within assigned territories. Before choosing a franchise, inquire about policies regarding office locations. Research how many of the company franchises are operating in the desired region. If the market is already saturated, it may not be lucrative to establish another office. Franchisees may not have the option to operate a business close to their home or in the area they want. Discuss these options early, and see which areas are open for new development before you do additional research or apply for financing.
Finalizing an Agreement
After all the research has been conducted, and a suitable location has been determined, it's time to close the deal. Research loan documents thoroughly, and have an attorney or financial advisor give them the once over as well. The franchisee is required to supply personal financial information such as income verification, bank statements and tax returns. The franchise is required to disclose specific information related to the terms and conditions of the transaction. This full disclosure prior to closing protects both parties. One of the main advantages to owning a real estate franchise is the ongoing support offered by the franchise. These details can be written up during or prior to finalizing the contract.
AnnaBeth Rouse is a contributing writer and media specialist for Allied Van Lines. She regularly produces content for a variety of career and lifestyle blogs. Interested in more information about real estate franchises? Rouse suggests working with Franchise Direct.