Is a Franchise the right business for you?
Franchising isn't right for everybody. It involves particular mind-set and attitudes. You will be working within someone else's system. It also requires a high degree of management ability. What many franchisors look for in a franchise applicant is the ability to run their outlets - not just an understanding of the 'technical' aspects of their business. For many franchisors, for example fast-food outlets, prior experience is seen as a major disadvantage for someone taking on a franchise. It is much easier to train an inexperienced person then to re-train a person with experience that may not adhere to their system.
Here are some key points to consider about franchising and whether it is the right way into self-employment for you.
· Is your physical health good? Would you have any problem obtaining a life insurance policy, for example?
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If you are not in good health then franchising is not for you.
· What proportion of your assets would you be willing to risk in a franchise? Calculate the value of your assets including savings, 401k, car, house etc.
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You will have to invest quite a lot of your own capital in the venture. You should realize that this will be unprotected and that if you invest all, there is a chance you could lose all. Examine the implications of this carefully and decide whether the investment you will need to make could leave you over-exposed.
· Calculate the financial commitments you have at present - mortgage, rates, etc. Could you afford the drop in income that usually occurs in the early life of a new business?
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During the early months of any new business cash flow problems may result in income from the business being lower than expected. Are your financial commitments such that you could manage on less income than you have now?
· Do you think your partner will be willing to give you full support? There are always problems and difficult periods even in a successful franchise, and it is during these times that you may need a bit more family support than usual.
· Is your partner aware of and willing to share the risks involved?
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Discuss the franchise idea with your partner and ask him/her to make a list of their concerns and worries.
· How do you think your partner would react to the disruption of family life that starting a new business entails? This disruption could range from a few missed meals to the abandonment of an annual vacation and the working of long hours. Ask them for reactions to these possibilities.
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You should of course have discussed the franchise idea fully with your partner. Many franchisors positively encourage the involvement of spouses or partners in their discussions with franchisees. But you should also ask yourself whether your relationship would stand the strain of the sacrifices, which are inevitably involved in starting your own business. Be sure your partner is not going along with your ideas just to make you happy; make sure he or she is as committed as you are.
· How many extra hours above a standard 40 hour week would you be prepared to work as a franchisee?
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Running a franchise could involve much more than a 9.00am to 5.00pm, weekday job. You may have said that you would be willing to work 20 or more hours extra. Is this realistic - what would you give up in a week to work those extra hours? If you said 2 or 3 hours or more, do you really have the commitment necessary to succeed in a new venture? It is your business and you will be responsible for all your decision. You have to spend all of the hours necessary to make the business work.
· What reaction would you have to receiving strict guidelines by the franchisor on how to run your business?
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If you value a high degree of autonomy and want to make your own decisions on how to run and develop your business, then franchising is possibly not for you. The franchisor is in ultimate control and any resentment of this will make the relationship very difficult.
· What involvement would you expect from the franchisor in resolving problems encountered in running the franchise?
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Although the franchisor should help you with certain types of problems, do not expect assistance with all your minor difficulties. If you expect a large degree of assistance you should choose a franchise very carefully, selecting one which is well established and with well-defined systems for operating the business.
· If you see improvements that could be made to the environment in which you work, how determined would you be to change them for the better?
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In running a franchise, you will be expected to go by the rules, not change them. A franchisor will object vigorously if you try to 'personalize' the business. If you will be unable to resist making changes, then think again?
· What would be your reaction to doing tasks, such as serving food or cleaning tables?
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You may need to do a lot of the dirty work yourself, particularly in the early days. If you don't want to get involved, make sure that profit margins are sufficiently high to enable you to take on staff.
· In your present employment are you used to making financial decisions?
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The franchisor will be concerned if you have had little or no financial experience. Are you convinced that you have the necessary financial skills and knowledge?
· Do you think you have the talent and skills that is required to market and sell your service or product?
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Similarly, are you capable of selling and marketing your business? Are you sufficiently creative? A franchisor will be reassured if you have had some experience.
· How good do you think you are at motivating staff?
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If you have had problems with staff in the past and have blamed them, are you sure the problems were with the staff and not in the way that you dealt with them? Again, some franchisors may be concerned if you have had no experience of staff management.
· Have you had frequent changes in jobs?
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If the answer to this question is yes, are you sure that franchising is something you really want to commit yourself to and that you aren't just looking for yet another change? On the other hand, if you haven't moved jobs a few times in your career, are you sure that you are suited to the different lifestyle, which you may face?
· What are your feelings on job security? Some people like a lot of job security, whilst for others this is not important.
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Think carefully if you don't like insecurity, are you prepared to give up the comfort of receiving a regular salary check.
· Can you deal with stressful situations?
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Running your own business can be very stressful; you must be able to deal with stressful situations that can occur on a fairly regular basis.
· What do you think can go wrong with you buying a franchise? List all the things you can think of that could go wrong together with all the effects that running one could have on your personal and family life.
Comment A short list will probably indicate that you have not thought the issues through properly. Having considered every aspect of this life changing venture and created a “plan of action” for every potential problem, you should be well prepared for your future. You may have a long list which could, in the end, make you reconsider yourself as a potential franchisee. Should this occur, don’t be alarmed or discouraged, as was said in the beginning, franchising is not for everyone. |
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