Top 5 Things to Consider Before Investing in a Franchise
There are all kinds of reasons why you might want to invest in a franchise as opposed to, say, starting your own business. For one thing, the entire business plan is pretty much laid out for you. You won’t be called upon to reinvent the wheel. In fact, the franchise owners will hand over the basic blueprint the moment you become a member of the family. Everything from the look of your shop, to the clothing your employees wear, to products you’ll sell and the way you’ll display them will all be handed over so that the only heavy lifting on your end will occur when you heft a sack of gold into their laps to seal the deal. However, before you jump head-first into a contract, there are a few things you might want to consider first.
- Your budget. Investing in a franchise is not an inexpensive pursuit. Sure, you’ll gain a lot in the process, but you’re definitely going to have to pay for having all the hard work done for you. Did you think you could simply jump aboard the wagon and take the reins without paying your fair share for passage? You get just what you pay for when you invest in a franchise – the name, the reputation, and all the consumers that go with them. But you’d better have a pretty good budget in place if you want to secure this business opportunity.
- Industry knowledge. The best way to go into buying a franchise is with management experience in a franchise store under your belt. As the owner you need to understand how the operation runs, and the best way to get there is to start in the trenches yourself. Only the worst kind of fool buys a business he knows nothing about and expects to succeed at it. Maybe one in a million could make this scenario work and you’re probably in the other 999,999.
- Success of other stores. It’s a good idea to do your homework before you buy to ensure that your investment is sound. You need to gather public information about sales figures, stocks, and market share if possible. And you should find out how many current owners are trying to get out of their franchise ownership, or alternately, how difficult it will be to wrest a business location away from one of them (if they have been artificially limited). These could all be good indicators of whether or not your own franchise will realize success.
- Demand in your area. Regardless of how popular a franchise seems, you never really know how it might perform in a given area. However, there are ways to test the waters first and see how your store might fare in a particular region or amongst certain demographics. Armed with this knowledge, you can find the perfect spot to open your franchise.
- The rules of franchise ownership. Even the best franchise opportunities are bound to come with some strings attached, and they shouldn’t be a problem as long as you understand what you’re agreeing to up front. Frankly, the onus is on you to find out exactly what is expected of you as a franchise owner; after all, you must uphold the standards, practices, and ideals of the established brand you’re buying into. Certainly you’re happy to get the perks, like a built-in consumer base and a fully formed marketing plan. But you should also be aware of all fees associated with ownership, as well as the rules and regulations you’ll be expected to follow. When you’re prepared you’re a lot less likely to get ruffled over the fine print.