Questions to Ask Before Buying a Franchise
Casa de Corazón Franchise FAQs
If you are thinking about buying a franchise with Casa de Corazón, we invite you to look through these questions and answers to learn more about our opportunities as well as any requirements needed. If you find that you have more questions, feel free to reach out so we can help walk you through the process.
What Are the Advantages of Owning a Casa De Corazón Franchise?
Starting a new franchise business gives you the independence of entrepreneurship and control of your path. However, sometimes it feels like you’re going at it alone. The beauty of a franchise is that you get all the independence but with significant support.
- The product or service is well-established and may already be widely recognized.
- Instead of spending years building your customer base, a franchise brings you an audience that may already be eager to spend money with you.
- Franchises offer support long before the business opens. The best franchisors help their franchisees choose a site, obtain financing, learn how to run the company, and celebrate its opening.
- A franchise is more likely to succeed than an independent business because the product or service is already proven.
What Should I Consider Before Buying a Franchise?
When you’re starting a business of any kind, you want to research the industry carefully. Opening a franchise is no different. Here are a few questions about franchises you’ll want to investigate thoroughly.
- Do you need experience in that industry? For example, Casa de Corazón doesn’t require experience in child care for our preschool businesses.
- What is the time commitment required? If you have professional and business demands on your time, you want to ensure that you give adequate time to your new franchise effort.
- Does the franchisor have a history of success and financial stability? Look for a pattern of steady growth and franchisees operating stably after some time.
- What kind of experience does the franchise management team have? The representatives should have broad business experience in the industry and outside of it.
- What is the upfront cost to join the franchise, and how will you finance it if you don’t have the cash available? Expenses can include real estate, equipment, franchise fees, and miscellaneous expenses.
- What are the ongoing expenses of being part of the franchise? Ask questions about annual franchise fees and what kind of support and materials you receive each year.
- What are you required to buy from the franchisor? Where do you get those goods, and how do they get to you? Most franchisors require you to purchase specific supplies or services directly from them.
- What are the conditions under which the franchise relationship can terminate or renew? One crucial question to ask is how many franchisors leave the system each year.
What Legal Information Should I Review When Considering a Franchise?
Franchise law can be complex, but it is critical that the franchisor and franchisee clearly understand the relationship to be successful. Franchisees should consult an attorney with experience in dealing with franchise law to understand the risks and benefits of the arrangements fully. Two important legal documents to review carefully are the Franchise Disclosure Document, or FDD for short, and the Franchise Agreement. Together they govern the relationship between the franchisor and franchisee.
What Information Does a Franchise Disclosure Document (FDD) Contain?
The Franchise Disclosure Document, or FDD, is a document for prospective franchisees. The document details the franchise system, the franchisor company, and all the things you must agree on if you wish to be part a Franchise Owner. Legally, the franchisor must show you the FDD before you decide to become a franchisee. Fourteen states mandate that franchisors register their FDDs with the state before selling to franchisees.
While the FDD may vary some by state, here are a few of the critical components:
- A description of the company, its history, and any current affiliates
- A list of the officers, executives, and directors managing the company, along with their professional backgrounds
- Full disclosure of any litigation, whether civil or criminal, pending against the company or its management team
- Disclosure of any history of bankruptcies filed by the company or any member of the management team
- The upfront fees to join the franchise and how they are calculated
- A list of any other fees and payments franchisees must make
- A table of the required initial investments to get started
- Restrictions on where franchisees can purchase goods and services
- A table referencing all the obligations to which the franchisee must agree
- The terms of any financing agreements upon which the parties agree
- A list of services that the franchisor will provide, such as advertising, computer systems, and training
- The boundaries of the franchisee’s exclusive territory, if applicable, and the conditions in which those boundaries may change
- The rules governing the use of trademarks, trade names, etc.
- A description of any patents and copyrights held by the franchisor and their permissible uses
- A statement of obligation in which the franchisee agrees to participate in the running of the business.
- Any restrictions on goods and services the franchisee can sell to customers
- The terms of renewal, transfer, termination, and resolution of any disputes
- How much the franchise company pays celebrities and others to serve as company spokespersons
- Any information on the performance of the unit
- A list of locations and contact information for franchisees in operation
- At least three years of audited financial statements
- The contracts the franchisee must sign
- A statement of receipt as proof that the franchisee saw the FDD
What Are the Most Important Items in the Franchise Disclosure Document (FDD)?
Most experts consider these to be the essential items on the FDD:
- Information related to costs, both upfront and over time
- The obligations of the franchisor
- The terms of renewal, transfer, termination, and resolution of disputes
- Information on expected financial performance
- The number of franchisees, how many are taken back and resold, and contact information for the people who left the system
- Financial statements for the last three years
- Contracts of all types
How Much Money Can I Make Owning a Casa de Corazón?
We provide some basic financial operating information in our Franchise Disclosure Document (FDD), which will be provided to you after receipt of a full application.
Do I Need to Be Bilingual to Own a Casa de Corazón?
As an owner of a Casa de Corazón franchise, you do not need to be bilingual, but you will need to ensure all employees are bilingual or Spanish-speaking. Your staff being fluent in Spanish is a requirement of Casa de Corazón.
What Is the Process to Becoming a Casa de Corazón Franchise Owner?
Your first step is to submit the Inquiry Form.
Once we have received that from you, we will contact you to have an initial discussion and determine if you meet the primary qualifications we seek, as well as provide you with an overview of the opportunity.
Next, we will send you the Franchise Disclosure Document to review with your attorney. We will also send you an application to complete.
If we are moving forward, it is time to see Casa in person! We will invite you to a Casa de Corazón Discovery Day at our corporate facility.
The final step is signing the Franchise Agreement — then we can get started!
What Is the Term of My Franchise Agreement?
The initial term is for a period of 10 years, after which you can renew in 10-year increments pursuant to the Franchise Agreement and lease availability.
Will My Territory Be Protected?
At the time we approve your site for your center, we will also grant you a territory. We refer to this territory as the “Designated Territory” and we describe it in the Rider to your Franchise Agreement. Your designated territory will generally encompass an area surrounding your center that is the lesser of 3 miles, or an area encompassing 10,000 households.
The exact size of your territory will depend upon the various factors including whether your center is located in a metropolitan area, the size of your center, and the number of students you are licensed to care for. We will allow you to relocate your site so long as it continues to be in your market, is not within the designated territory of another one of our franchise owners, and meets our other then-current requirements for a site.
Does Casa de Corazón Help With Site Selection?
Yes! We will work with you in your search for an appropriate site with our national real estate team. We may engage a local broker who is familiar with the market. Our team will also do a complete demographic and market analysis.
Our vendor will submit Letters of Intent (LOIs) and negotiate the main business deal points. The last step is to have you and your attorney finalize the lease with the landlord.
What Is the Total Investment for a Casa de Corazón?
Investments vary depending on the size, location, and market of your location. Whether your location’s building is already completed or requires construction is also factored into the investment.
We estimate that your initial investment will be between $681,000 – $2,447,000 including real estate improvements.
What Is the Royalty Fee and Advertising Fee for a Casa de Corazón?
The royalty fee is 7% of gross sales and the advertising fee is 2% of gross sales.
How Did the Franchise Get Its Start?
A great place to start is on common ground. You should find out the organization founder’s motivation for starting their business and ask yourself, do you possess similar skill sets and/or a passion for the industry? Finding the perfect match when considering investing in a franchise requires that you feel that the franchisor has adequate experience and that you identify with the fundamentals of their business and their business model.
What Criteria for Franchise Owners Are You Considering?
Franchisors typically have a list of accolades and qualifications, as well as individual personality traits that fit best with their brand. It’s important to investigate those criteria to determine whether you feel your personality and individual skill set will fit within their interests.
How Much Will You Need to Invest?
One of the most important factors to consider when planning to open a franchise is the initial investment. The initial investment could vary from a few hundred thousand dollars to more than a million.
If you reference Item 5 of the Franchise Disclosure Document (FDD), this is where the franchisor will list the initial franchise fee, and Item 7 on the FDD will detail any additional starting costs—this can pertain to costs such as equipment, licenses, and even real estate. If you’re unsure of any items listed on the FDD, be sure to consult the franchisor regarding those areas of concern so that you have a clear understanding of your investment.
How Much Liquid Capital is Needed?
Aside from the amounts disclosed in the FDD regarding the franchise fee and initial start-up costs, franchise owners will need enough operating capital for at least the first several months or until the business breaks even. It’s important to find out the average amount of time it takes to start turning a profit so that you can be financially prepared to weather the storm.
How Do Royalties and Marketing Fees Work?
Make sure you understand any ongoing financial obligations to the franchisor, including whether or not you will be obligated to pay royalties or other ongoing fees. Understanding what fees you’ll be required to pay is essential for managing the financial health of your franchise.
How Financially Stable is the Franchise Company?
For this data, you’ll want to reference Item 21 of the FDD, which will give you an idea of the franchise system’s financial structure. Asking questions like, “how has the franchise shown steady growth” and “what are their plans for growth” are essential to understanding the overall financial picture of the franchise you’re interested in investing in.
You’ll also want to investigate whether or not the bulk of their income comes from the sale of franchises or franchise royalties and whether the franchisor designates a reasonable amount of funds to the financial system to keep the business healthy. Keep in mind, their success will inevitably be your success, so this type of financial information is paramount.
How Many Locations Are There, and What is the Success Rate?
The number of branches a franchisor has can help determine the size of their organization, but that doesn’t necessarily mean they are successful. A large franchisor may have more branches than they can support, with finances stretched thin across those various locations, whereas an up-and-coming franchisor may not have enough resources. It’s important to inquire about the success rate of an organization’s franchisees and for you to determine the reasons for those failed units (if there are any).
How Much Money Could You Make?
While your individual success will rely on a variety of different factors, the franchisor should have a general idea about what a typical franchise owner will earn and what your income potential might be. It’s important to be cognizant that the franchisor may offer you information regarding gross sales, which won’t include expenses for rent, royalties, operating costs, and other ongoing fees and expenses.
What Are the Expectations of Franchise Owners?
As a franchisee, there are many duties you’ll have to shoulder regarding operations, payments, and other obligations as stipulated in the franchise agreement. It’s of the utmost importance to have a discussion with the franchisor so you’ll have a clear picture surrounding what is expected of you as a franchisee.
What Sets the Franchisor's Organization Apart From Competitors?
While the market for some brands, products, or services is highly competitive and, in some cases, saturated, others are more innovative and niche. Where does their brand fall along that spectrum? You should consider the level of competition in their specific market and which companies are the top competitors. Ask the franchisor what their unique selling points are and what gives them an advantage over the competition. Have them sell you on their company.
What is the Franchisor's Method for Conflict Resolution?
An important part of determining whether or not a franchise opportunity is for you is investigating the franchisor’s litigation history. Item 3 of the FDD discloses information regarding legal action involving the franchisor and its chief officers.
A large number of claims against the organization could be a red flag and could indicate that the franchisor has displayed a pattern of not adhering to their franchise agreement. Inquire about their process for handling disputes with franchisees, and investigate what reasons your franchise agreement could be terminated if you fail to uphold your end of the bargain.
What Will My Territory Be, and How Will It Be Protected?
Learn how the organization manages territories or regions for its franchise owners. Based on your franchise agreement, you want to know whether or not they’ll be selling franchise rights to every person on the block. You’ll need to find out whether the franchisor reserves the right to approve or disapprove of the location of your franchise, whether you’ll have an exclusive or protected territory, and you’ll want to know whether you’ll be protected from competing units, which could inherently hinder your success.
What Does a Typical Day Look Like?
Learning about the daily duties and goals of a franchisee can help you get a clearer picture of what your workload will be. It’s important to discern what challenges you might face as a franchise owner, and luckily for you, franchisors are required to disclose the contact information for past and current franchisees. These people will be your ultimate resource in determining whether or not a franchise opportunity will be right for you.
Speaking with both past and present franchisees can give you an honest perspective on how the franchise system operates and the subsequent pros and cons.
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Disclaimer: Note: The information provided in this Website is not intended as an offer to sell, or the solicitation of an offer to buy a franchise. An offer or solicitation can only be made by a franchise disclosure document. This communication is not directed to residents of any jurisdiction that requires registration of a franchise prior to offering and selling a franchise in such jurisdiction. No franchises will be sold to any resident of any such jurisdiction until the offering has been registered and declared effective by such jurisdiction and the required offering circular has been delivered to the prospective franchise owner in compliance with applicable law. At the present time, we have elected not to register in any of the following states, and therefore, do not and cannot solicit franchise sales in or direct offers to these states: [California, Hawaii, Illinois, Maryland, Michigan, New York, North Dakota, Rhode Island, South Dakota, and Virginia]