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If you're considering starting a new business by buying a franchise, you might be feeling excited and nervous at the same time. You want to make sure that this business decision is the right one, but there's so much information out there and it can be difficult to know where to start.
With that in mind, we've compiled some of the most important things for prospective franchise owners to think about before making their final decision. The items on our list include understanding your financial situation; determining which type of franchise would work best for your needs; researching the company and its competitors; and looking into franchisee reviews.
Consider how much of an investment you can afford, either financially or timewise, for day-to-day franchise ownership. Are franchise royalties expected, or is there an upfront franchise fee that needs to be paid before opening your doors for customers? What does it cost to run and maintain your franchise monthly? All this information is essential to make an informed franchise investment decision.
Key Considerations Before Investing in a Franchise
Think about what type of franchise would be the best fit for your lifestyle and whether you're ready to commit full time to make it a success. Not every franchise requires a full-time commitment and can be run as an absentee - or part-time - owner/operator.
Start looking at franchise opportunities that fit your background and skillset. For example, if you come from a customer service or sales background, think about investing in a franchise like The Maids, which is looking for franchise owners who are passionate about helping others.
Locating franchise opportunities – you can use various resources like franchise directories, franchise consultants and franchise trade shows for franchise concepts that may interest you. Franchise consultants can help you target specific industries that are showing promise, or new franchises that are performing well in the marketplace.
Get acquainted with franchise company's business model and competitors. If you were running the franchise locally, why would a prospective customer by from you and not another company?
Contact franchise companies to see if they are recruiting new franchisees. A franchise consultant can quickly provide a "territory check" on any franchise concept that interests you.
Conduct due diligence on all aspects of the business model, including their financial stability and customer base. When you are investing in a franchise, you benefit by capitalizing on a successful enterprise. Ensure that the franchisor that can provide you with proven sales success with their existing franchisees.
It's also important to do your research on the company or franchise you're considering investing in, checking out their social media profiles and other online reviews of current franchisees. For example, if you're looking at franchise opportunities in the restaurant industry, make sure to read what others have said about their franchise experience.
Verify if there are any franchise lawsuits pending against them. A single lawsuit from a disgruntled franchisee may not be particularly worrisome, but several individual or class-action lawsuits may be a serious red flag.
These are just a few items that you should consider before investing in a franchise . Everyone's situation is different, so it may be necessary for you to spend more time on some aspects than others. Find what works best for you, and then go from there.
Working with a qualified franchise consultant can help you make a better-informed decision about which franchise might be right for you. You can also gain some perspective on franchise opportunities by reading franchise reviews.
Once you've narrowed down your list, it's important to do in-depth franchise research and work with a franchise attorney. You can also find some great franchise ideas by attending franchise trade shows or researching franchise opportunities online.
Finally, you should make sure that your franchise of choice will help you achieve your financial goals.
Once you've made your franchise decision, make sure to read franchise disclosure document (FDD) carefully. Sign a franchise contract only after doing complete research on the company and its products/services and speaking to other current franchisees.
Ensure that franchisor is willing to provide adequate training for new franchise owners and understand how the franchisor will support you over time to help ensure your success.
Investing in a franchise business can be an exciting way to take charge of your career, but it's important to do thorough franchise research to find the right franchise opportunity.
With so many considerations to keep in mind before investing in a franchise, it's important for prospective franchise owners to work with the right people and gather as much information as possible. This can be achieved by working with a franchise consultant, franchise attorney, franchise trade show or franchise online directory.
With years of entrepreneurial experience – including owning and operating a franchise – the team at Franchise@50 is here to help you navigate the process of identifying and qualifying various franchise opportunities and finding the right business for you. Contact us today for an initial, no obligation consultation.