Tips for choosing the right franchise
Choosing a company of which to become a franchisee is a huge decision, and will have an obvious impact on everything from how your business is run to your likelihood of success. There are a number of different factors which you’ll have to consider when deciding which is the right business for you. In this article we’ll aim to make the decision a much more straightforward one for those thinking about buying a franchise and running your own business.
Get to know yourself and your goals
Everyone has different motivations for wanting to become an entrepreneur. Before starting, you need to take a step back. You have to be honest with yourself and introspective about what you’re trying to accomplish by buying this business.
Is this something that you want to do as a hobby, and still work a full-time job on the side? Will this need to become your primary source of income? Are you looking to build equity? Do you eventually want to own more than one franchise? These are some of the questions you need to ask yourself you begin.
By figuring out your actual goals, and determining what you are looking for in a franchisor, you will be able to decide what franchise is a good fit to help you reach success.
How much money do you have to invest?
You might have an idea of what type of business you want to get into, but taking inventory of your capital will give you a realistic sense of what franchise opportunities are possible for your budget. Like any business, you shouldn’t expect to be profitable right away, so ensure you have enough money to live off of while you get off the ground.
How involved can you be?
Some people prefer to be directly involved in the delivery of the business’s product or service, but for those who open a franchise on top of working a full-time job, this isn’t an option. Think about how much work you would personally be willing to put in.
Examine your skillset
Think about the things you’re good at, what skills you’ve acquired in your previous professional experience, and what you’re comfortable with. Are you comfortable with sales and cold calling? Do you like interacting with customers? Can you manage people? Do you like being out in the field working with clients and customers instead?
While you may have the relevant skills, you don’t have to be an expert in your field right away. Franchising allows you to reinvent yourself and go into a completely different industry, leaving the functional expertise to the franchisor.
Decide what type of company you want to be part of
Do you want to join the franchise system of an established company with a proven business model, or would you be willing to be one of the first franchisees of a company? The upside of the latter is you would have more power to negotiate. New franchisors can often be more flexible with contract terms with the first few franchisees as well as more generous with territory sizes. On the downside, however, the franchisor may not yet have been able to secure volume discounts on the types of supplies needed to operate the business.
Research the Franchise’s Business Model
Unlike with an established franchise, a new franchise’s business model may not yet be fine-tuned. You don’t want to invest in a business model that you don’t understand or will make it harder for you to succeed. Make sure you take the time to fully learn the business model of a company before you consider becoming a franchisee.
Do your due diligence – review the disclosure document
By purchasing a franchise, you will be entering into a legal agreement, so protect yourself by making sure that new franchisors have done everything correctly and have all their papers in order. One way of doing this is by reviewing a company’s disclosure document. This is a document provided by a franchisor when they are approached by a potential franchisee and both like each other. It contains key information about the franchise such as the history of the franchisor, the annual turnover that a franchisee can expect, the investments required, and the franchisee’s obligations. You will need to study this closely, and be prepared to devote a significant amount of time to doing so.
Hopefully this article helps to make the choice of which franchise to invest in somewhat more straightforward.
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