What You Should Know Before Becoming a Franchisee
If you have the capital but starting your own business from the ground sounds a bit intimidating, then buying a franchise is a good start. However, franchise ownership, just like building a business from scratch, comes with risks and can be stressful without preparation and research. Before you rush into a franchising venture, here are important factors that you need to consider.
Be Clear with Your Motivations
Franchising can provide a lucrative source of income but only when executed properly. Ask yourself first why you want to buy a franchise. Don’t do it if your sole objective is to get rich overnight, or if you want to get out of your current job on a whim just or because you have the capital to spend.
Know Which Business You Want to Get Into
Franchising requires time and commitment. With many franchise opportunities available today, ranging from restaurants and coffee shops to clothing boutiques and spa services, finding the one that best suits your skills and interests is important. Choosing a product or business type that you care about will keep you going especially when your business is going through a tough time.
Allot Time to Research
Social media testimonials, the long lines you see at the malls or promotional materials should not be the only bases of your decision when choosing the business to franchise. You need to gather as much information as you can about the company you’re considering. You can do this by interviewing the franchisor and existing franchisees.
As part of your research, you should ask the franchisor to share information about its current franchisees, audited financial statements and the franchise model of the business. This will help you understand if the business is growing, if the franchisor is implementing a good monitoring system and financial controls as well as its success ratio in the industry. Don’t be afraid to dig for dirt, because if you don’t, you might be missing out critical points or warning signs.
Franchisees are a great source of information for matters such as budget, how long it took them to profit, issues that they encountered during the first few months of operation and feedback from the franchisor. Try to talk to as many franchisees as you can as some may not be willing to share information, especially when it comes down to profit numbers.
Consider Professional Help
Understanding financial statements or legal documents may be difficult if you don’t have the background or you’re a first-timer. You need to hire a franchise consultant, but you should do this with caution. Some franchise consultants would want to immediately close the deal so they can get their commission. You must look for a credible consultant that will help you understand the franchising business better and create a business plan that suits you.
Hiring a dependable lawyer and accountant is also ideal since there will be a considerable amount of legal paperwork and expenses involved. They will help you make sound legal and financial decisions.
Prepare for Long Work Hours
You should expect that running your franchise will take long hours, probably longer than your day job. You will be spending time learning about the franchise model and the end-to-end processes in managing the business as well as training your staff and managers. During the early stage of your business, you will need to be on-site from opening to closing hours, until your team can manage without your daily presence.
While being your own boss sounds like a good plan, there’s more to buying a franchise than meets the eye. You should take time doing research and ask the proper questions so you can carefully evaluate your options before arriving at the final decision.