There is no one way to run and own your own business. Some try a do-it-yourself method, starting from scratch and getting creative. However, doing this takes a specific skill set and personality type. On the other hand, some others prefer a more structured method to getting a business up and running.
Franchises offer a turnkey method of starting a business that appeals to many entrepreneurs. But if you’re thinking about buying a franchise business, here are five things you should ask yourself before you jump in.
1. How much capital is required?
The purchase price of a franchise can vary widely. The franchisor should be able to give you a good idea of all the initial, upfront costs associated with purchasing the franchise, as well as forecast costs for the first one or two years.
There might be hidden costs as well that you’ll want to account for, as sometimes the initial fee only covers buying the right to trade under the brand – with everything else an added cost.
2. What are the legal requirements?
Make sure you review the contract with your Lawyer, and that you’re comfortable with all of the language outlined therein. Is there anything that feels off to you or your lawyer or anything you weren’t expecting? If you feel pressure to sign before you’re ready this is also a red flag.
Deciding to invest your own money into a franchise is a big deal and you should feel fully comfortable with your decision before committing to anything.
3. What’s the franchise’ track record?
A little digging online can tell you a lot about the franchise’ reputation and business record. It can also reveal whether there are any past or present legal judgments against them. Also, speak with an existing franchisee if possible. Use them as a sounding board and ask them all the questions you can think of.
Keep in mind that the challenges other franchisees have may not be the same challenges you will face, but their experience of working with the parent company will more than likely mirror yours.
4. Is there market demand?
Ongoing success depends on the longevity of the product or service sold by the franchise. You also want to evaluate things like product quality and inventory costs.
Take stock of the competition too. Is there a lot of competition regionally? What about locally? Does your area already have the franchise you want, and is it successful?
5. Does your skill fit the franchise?
Make a list of all the skills you have, whether they are personal or professional. When shopping for the right franchise opportunity, consult this list often, and ask yourself if your skills align with the day-to-day requirements of the franchise.
If you’re not good with people, but great with computers, then working in a job where you are constantly facing clients may not be the best choice.
Drill down your list of strengths and weaknesses, and ask others for their input. You want to be sure that you’re selecting a franchise that really speaks to your strengths.
Did you find this article helpful? Let us know in the comments!