Since owning a franchise is a long-term commitment, you should pursue a business that will interest you in the long run.
Ask specific questions about the process, ongoing support, and terms of the agreement to help you make your decision.
This article is for business owners who are considering buying a franchise but aren’t sure which one is best for them.
If you are looking to start a new business, franchising can be a great option. There are franchises in almost every industry, so you have a wide variety of options. So how can you limit it and ultimately determine the best one for you?
With a franchise, you get a proven product or service while being your own boss. However, you still have to put in some effort, so finding a good match for your passion and skills is essential. Many factors need to be taken into accounts, such as franchise fees and support provided by the company’s headquarters.
Top Questions to Ask When Choosing a Franchise
If you don’t know where to start, ask yourself these questions first, which will add some parameters to your franchise search:
What are my personal goals?
Everyone has different reasons for wanting to become an entrepreneur. First, ask yourself what your goals are, said Dan Martin, president and CEO of franchise consultancy IFX. Do you want to earn money, spend more time at home or take a step forward in your career?
“By identifying your true goals, you can determine which franchise is best for you to achieve those goals,” said Martin.
What kind of industry do I want to do business in?
Franchises are not limited to fast food restaurants and cafes. This business structure exists in virtually every category of products or services. You can run a franchise in tutoring or college prep, housekeeping or housekeeping services, restaurants and health and wellness, retail, and many other categories.
What are my strengths?
The most successful franchise owners are doing the right job for them, and looking for ways to delegate or outsource functions, they may not be good at or have time to do.
What role do I want to play in the company?
There are two types of franchisees: absent owners, who hire staff to run the day-to-day business, and owners/operators, who are directly involved in running the business.
What kind of commitment do I want to make?
Many franchise contracts are multi-year contracts. While some last up to five years or as much as 25 years, the average duration of a franchise agreement is 10 years. This means that you are committed to taking this opportunity in the long run, as it can be challenging to negotiate a franchise agreement.
What is my investment budget?
Franchise costs vary widely depending on the specific industry and business model. While some prepayments are less than $ 10,000, others can be more than $ 1 million. Terry Powell, founder and CEO of franchised business coaching firm The Entrepreneur’s Source, said potential franchisees should weigh the initial investment against the expected return, as well as their income goals, style of life, wealth and equity.
While some franchisees want their franchisees to have experience in the industry, what is important to them is that a franchisee has the core business knowledge and entrepreneurial spirit to succeed.
Key Takeaway: Before diving into a franchise opportunity, ask yourself specific questions about your goals, strengths, desired area of business, level of involvement in day-to-day operations, and the amount you are willing to contribute. Invest in this opportunity.
What to Look for When Choosing a Franchise
Once you’ve established the area and business model you’re interested in, it’s time to pick a specific franchise. Here are some factors to consider when making your decision:
A healthy support system for franchisees
One of the most significant advantages of buying a franchise is that the brand is already well established, so make sure the franchisor is available to guide you with endeavours like marketing.
Investment in your potential
Get the feeling that the franchisor cares about your career success and growth in the business.
The franchisor’s professionalism
When asking your first questions of the franchisor, keep in mind how they handle your request. Do they answer questions in a timely and complete manner? These first initial contacts are essential to get a feel for how the franchisor is doing business.
Sales and business approach
Ask yourself what the franchise sales approach is, if there is enough business available in your market and if you have enough money to run successful campaigns, said Alan George, vice president of Franchise Marketing Systems. He also advised finding out about their approaches to selling and advertising, and whether they will work in your market.
Online reviews
Be wary of information on message boards, Facebook or LinkedIn groups, or articles where affiliates talk about their experiences with the franchisor. If the reviews are mostly consistent or positive, you can get a good idea of the company’s business practices.
Feedback from current franchisees
The best way to learn more about a franchise is to speak directly to the people who work with them. Be sure to ask specific questions about the franchisor’s support system, licensing fees, and any exclusivity the franchisor can provide within a particular zip code or radius from a particular location.
Discussions at official events
Some franchises organize a “discovery day” or similar event where you can speak with representatives and find out more about the opportunities available to you. Likewise, attending franchise industry conferences, such as the annual conference of the International Franchise Association, is a great way to identify and compare your options.
Here are some other resources to help you select a franchise:
American Association of Franchisees & Dealers
Franchising.com
International Franchise Association
Key Takeaway: Find a franchisor who will be the right partner in supporting your growing franchise. Ask specific questions of franchisor representatives and talk to current franchisees to get a sense of how a franchisor is supporting its partners.
An existing and historical dispute between the franchisor and its franchisees might reveal a level of dissatisfaction with the system, or it might show that the franchisor is serious in maintaining its system standards for the benefit of all franchisees, a declared Daigle.
Turnover and pressure on resources
Item 20 of the FDD contains a list of franchisees currently in operation and a list of franchisees who have left the system or have ceased to communicate with the franchisor. You should reach out to as many current and former franchisees as possible and ask about their experiences, difficulties and profitability, Daigle said.
Key takeaway: A franchise disclosure document is critical to a franchise agreement, and you should consult an experienced franchise attorney to review and advise you on the terms of this document.
What Are the Benefits of Buying a Franchise?
Buying a franchise eliminates some important business development activities that you would otherwise need to invest yourself in building a business from scratch. This offers great benefits for those who do not have a lot of experience starting a business. Here are some of the services:
You are purchasing a proven business plan.
When you buy a franchise, you will likely receive a detailed manual on how to perform every process necessary to run the business. This can include anything from making the chips to washing the floors. This proven guide has already solved the dangers you would have had to discover for yourself if you started a new business.
Much of the marketing is done for you.
As an affiliate, you will benefit from the name recognition that accompanies the license of a regional, national or international brand. Besides, some franchisors may provide additional funds for marketing activities or marketing materials, such as posters, for you to use.
Opinions expressed by US Insider contributors are their own.
