A Guide to Buying A Franchise The Right Way
The franchise-growth rates in 2016 again exceeded non-franchise business growth rates and continue to rise by 2.6% annually. One reason for this is that 300 franchise business lines already cover 10 distinct business areas: automotive, business services, commercial and residential services, lodging, personal services, quick service restaurants, real estate, retail food, retail products and services, and table/full-service restaurants. There’s a lot to consider if you’d like to buy a franchise the right way.
With 300 franchise business lines, there a lot of franchise categories and companies from which to choose. What’s more, there are also advantages to opening a franchise instead of starting your own business from scratch. But like any business venture, there’s no guarantee that your franchise will be a success. To help you prosper with a franchise, you need to be prepared. And to better understand the challenges of running a franchise, here are some thoughts to consider before you sign up for a franchise opportunity.
Get a handle on the total investment to get your franchise going. This includes the purchase costs, starting inventory, as well as the working capital you’re going to need to invest before you break even. It’s vital that you appreciate these costs because you don’t want to go broke when you are on the verge of success. Couple with this is knowing how you’re going to finance the business. In some instances, a person can actually afford a bigger franchise opportunity than they think.
Playing to your strengths.
Do I have the right personality to be a franchisee? Ask yourself that question and answer it honestly. [See “Coloring inside the lines” below.] Consider your interests, your strengths, and your passions. Remember that when it comes to running the company, you’re the owner and have the ability to hire people to sell your products or provide the company’s services—you don’t have to do it all yourself. You can find employees with the talents you need. Operating the business profitably will determine your franchise success, not just how hard you work.
Coloring inside the lines.
Not every business owner is cut out to be a franchisee because it means working within someone else’s system and playing by their rules. There’s no “one off’s” and exceptions to exceptions. Determine if you’re compatible with the franchise structure and the way it operates. That’s part of your due diligence.
Find out how much time you need to invest, and be sure you understand what’s involved. You may be trading in a 10-hour-a-day job at a big corporation that you despise for a 16-hour-a-day job that you despise. You need to have a clear understanding about how much time you’ll need to invest to make the franchise a success.
Conducting thorough due diligence.
Every franchisor is different. As a result, you’ll need to do extensive research to find out everything you can about the franchisor. The more you know, the better informed your decision will be. When you’re conducting your due diligence, make certain that you speak to other franchisees—and not just the most successful ones. It’s great to learn from others so you don’t make the same mistakes.
Ask about the following:
- Key success factors;
- The major challenges and how they were overcome;
- If starting today, what they’d do differently;
- The factors that caused failure (if relevant); and
- The time it took to start to make a profit.
Support from the franchisor.
Find out how much support you’ll be receiving from the franchisor. In addition, see what other franchisees’ experiences have been and the amount of help the company offered those people.
Operating a franchise can be a terrific way to start running your own business, but you need to understand what the franchise is all about. The more information you have, the better your chances of choosing a franchise with the best potential for you.
Professional Support is Critical
Running a franchise isn’t easy, but a franchise system lets you earn and do more with its support. There will be questions about leasing commercial property, buying inventory and equipment, and paying franchise fees.
If you are thinking of buying a franchise our webpage will provide you with sufficient information to educate yourself further on the matter and make a good and calculated decision. Visit our franchise section for more information or call Andrew Rogerson directly at (916) 570-2674.