Starting a business is no easy feat. As an aspiring entrepreneur, you have two options when starting a business. The first option is to start from scratch, while the second option involves buying into an existing business. The latter is where the franchising model comes in.
Franchise business is the easier path for many people as it offers the opportunity to enjoy the credibility of established and trusted brands while implementing their mode of operation. It’s basically a “plug and play” business and spares entrepreneurs from many of the difficulties of starting a business from scratch. There is no need to come up with an extensive business plan, branding strategies, marketing, operations, and so on.
The number of franchise businesses available is extensive. You can buy janitorial cleaning franchises, food franchises, retail franchises, home services franchises, and so on. So, it’s not just about starting a business with relative ease. You can buy into a franchise business that matches your interests.
Despite all the promises of franchise businesses, they aren’t without perils. However, the issues associated with franchises can be avoided by buying into a good franchise business.
Below, you’ll find important things to consider before buying a franchise. Here they are:
1. Your Personality
Before buying a franchise business, you have to sign an agreement to follow the rules set by the franchisor. These rules are operating systems that have passed the test of time. They have been fine-tuned and perfected over several years, and all you have to do is apply them in your own franchise unit.
It’s worth mentioning that the reputation of the franchisor is at stake if you don’t follow their tried and trusted operating system. So, they are usually very insistent on this. There is no thinking outside the box or trying to do things your way. If there is to be a change in the modus operandi, the franchisor will inform you.
The point we’ve been trying to make is simply that you need to be someone that can follow the rules to own a franchise. The essence of the franchise industry is about being an ‘implementer’ not a ‘creator’. If you are the type that finds it difficult to follow the rules, then the franchise business may not be for you.
2. Training and Support
It’s in the best interest of franchisors that their franchisees succeed. This is why the best franchisors provide proper training, continuous development program, and ongoing support for franchisees. You are buying a franchise business to take the ‘easy path’ to owning a business. So, what is the essence of buying a franchise if you don’t receive maximum support from your franchisor?
Some franchisors don’t fulfill the numerous promises they make to businesses under them. So, it’s important to find a reputable business that will literally hold your hands and guide you to succeed.
3. Count Your Money
Buying a franchise may require significant investment. The larger part of your investment will involve the franchise fee and the cost of equipment. But there are other costs you’ll encounter down the line, such as marketing costs.
Due to the initial investment, it’s likely you aren’t going to make profit until after six months or a year. This isn’t something particular to franchises, as it applies to all new ventures.
So, before buying a franchise business, accept the fact that you may not be profitable for the first few months. Ensure you have enough capital to cover the business expenses as well as your personal expenses.
4. Have a Chat With Franchisees
Franchise Disclosure Document (FDD) is a legal disclosure document required by law to be given to the people interested in buying a franchise business by the franchisor. The essence of the FDD is to clearly outline the roles of the franchise and franchisee. It’s also to help the latter make an informed decision before buying a franchise.
You’ll find names and phone numbers of current franchisees in the FDD. Call a couple of them and politely ask about their experience working with the franchisor, the pros, cons, and any hidden fees they may have encountered. Who better to ask about the business you intend to buy into than those already in it?
Note that some franchisees may not be willing to open up about their struggles or challenges. So, it’s advisable you call as many as you can for more reliable feedback.
5. Read The Entire FDD and Know When To Seek Professional Help
FDDs tend to be very long, with many exceeding 40 pages. But you should take time to go through the entire document as they contain relevant information you would wish to know before signing with the franchisor.
Before you sign any legal paperwork, it’s recommended you have a lawyer look over it. You want to know exactly what you are agreeing to. You may also need an accountant to go over your finances to ensure everything adds up. Unless you have experience insuring a business in the past, you’ll also want to have a chat with an insurance agent.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.