For first-time business owners to hit the ground running with an effective business model, franchising is a great way. With the recent tax reforms and a steadily growing economy, the franchise industry is set to build on its momentum and grow at a great pace for the eighth year in a row. But with many industries and thousands of franchisors to choose from, finding the right one for you takes research and due diligence.
If you are someone with the financial capability, it might seem like a no-brainer to buy a franchise and capitalize on an opportunity. But the idea of stepping into the franchising world should not be taken lightly. When buying into a franchise, you will not only need knowledge of the current business model and the industry itself but also require self-awareness to recognize whether you are the right person for a particular job or not.
Thankfully, it is not hard to find the information you need, but there is a piece of research puzzle, just as important for you to dig into, the existing and former franchisees with the help of independent consultants themselves. After all, these are the people who run business day in and day out. Speaking with the professionals is a great way to get a more personal perspective on the business.
Once you have narrowed your options to a handful of potential franchises, you need to make a list of franchises along with the questions you will be asking them. Whichever way you feel comfortable reaching out to a business, the below questions will help you get a more complete picture of what’s like to be a franchise. Specifically, you would want to find out:
Questions to Ask Yourself Before Buying a Franchise
Depending on the business and your interests as a business owner, feel free to ask these below questions. However, you’d like and add as many to the list as you feel free are necessary. The bottom line is to find how happy and successful they are as a franchise with a particular franchisor. With specific parts of the business, they feel strongly about, ask them to describe their overall level of satisfaction.
-
Does the franchise have a standardized system? When thinking of buying a franchise, you are buying permission from a franchisor to sell their proven concept in a certain area. As the franchise is supposed to have a system that is going to make you money and also shorten your learning curve. Plus, to franchise a business, you need an operational system and processes that can be standardized to provide consistent products or services. This aspect is also required to train new franchisees and their employees. For instance, if you own an ice cream shop, they will have a written system detailing all the steps, like:
-
What systems to use
-
The store layout
-
How much ice cream and other ingredients are required
-
-
Is the franchise model right for you? While it is great to see yourself as an entrepreneur, it can be a double-edged sword when it comes to signing on as a franchise. This is because of their concept, and no flexibility to change the layout. Operations must be conducted according to their plan and you must use a franchisor’s supplier. You need to take an insight into all the aspects of a franchise and ask if you will be comfortable having little control over your business and being judged on their business. From restaurants, salons, and dog grooming, there are hundreds of opportunities out there. As every franchise business is unique in its own way, you should clearly understand the franchise model and what it entails. Note that, it is quite clear, in your signed docs, the franchisor tells you in advance what you can do and what not.
-
Do you understand the financial implications of buying into a franchise? A recipe for business failure is not knowing the true investment, risk of losing, ongoing expenses, the total investment required, profitability, part of the investment that can be financed, and how much you can earn. Proper financial due diligence is critical. Plus, during the start-up phase, understanding the business costs and personal financial requirements is essential to short-term and long-term success. Even if you want to start a small franchise business, then also you need to think of the money required upfront, during the buying process, and after the purchase. All you need to do is, analyze your financial status and invest wisely! Gathering all the information will help you evaluate the funds needed to sustain your lifestyle while growing your business.
-
Is the franchise already established? Having a profitable brand is just the beginning. It will give you a good idea about the business if it has running multiple locations up and running profitably before you take steps to franchise a business. This will give you a good idea of what’s involved and help them to succeed. Note that every brand aims to look pristine and polished from the outside, so to get the best you need to dig deeper than what customers see. Plus, you need to know the ins and outs of a brand so that there are no surprises once you are all in. To make it simple for you, an independent consultant like FranGuidance will help you with pre-screened franchises after considering your limitations, startup costs, and any other information they know after learning your goals and objectives. There is no such thing as being too informed about the franchiser and the general process of getting started.
- Does the franchisor provide enough training and support to get started right away? The answer will directly give you a sense of how well the franchisor’s training will likely prepare you for the growth of your own business. For instance, it can be easy to jump in and take a risk on a business without forethought, but it is as important to consider how you currently feel about the offering of this business. There are a lot of fundamental things that you would want to learn. Do your research, check in with your personal priorities, and if the water looks good, dive in!