Partnerships have a relatively low rate of success when starting a franchise. Well, the same is true for any business. Why?
Most partnerships fall apart within a few years or even months because of mistakes during their structuring process. In many cases partnerships are put together because one person either can’t afford a business or does not have the expertise to start one.
As a result, exited to find a partner and fulfill an individual dream, entrepreneurs rush to get started before taking care of some important details. Here are some things that need to be considered when starting a franchise business in a partnership:
1. What is the exits strategy? – Maker sure that you share the same vision of where you want to be in 5 years. If an offer comes along to buy your franchise, what will you do?
2. Decide what to do if you stop agreeing on things – effective dispute resolution tools need to be put in place before you get started. You are going to spend a lot of time with your franchise partner, don’t expect to agree on everything.
3. Decide who is the boss – it is almost impossible to run a 50/50 partnership. Someone needs to be the boss or the CEO. This way you know who is responsible for a final decision from the beginning instead of having to decide that each time on the spot.
4. Consider a Limited Partnership – Make sure that all the liabilities in your business are clearly spelled out. Getting a limited partnership agreement in place might be the best way to go. v 5. Look at some successful partnership examples – Baskin and Robbins (ice cram franchise) come to mind. Take you time to research what made other people successful in this arrangement. When considering a partnership it also helps to consult an attorney in order to incorporate all the details into a partnership agreement.
In the end, partnership may be a great option for you, the key is to give careful consideration to all your options and properly document everything.