Things you need to consider before buying a franchise
Are you willing and able to take on the responsibilities of managing your own business?
Some very through self-examination is important before buying a franchise. Franchise ownership is not easy. While the franchisor will give the start-up training and offer ongoing support, you, the franchisee, must be prepared to manage the business. Some franchises may function well with an absentee owner; most will require hands-on management. Are you willing to work hard? Perhaps harder then ever worked before? A forty-hour work week will be a thing of the past, particularly in the start-up phase of the business. Are you prepared to work 60- to 70-hour work schedules? Are you willing to mop floors, empty garbage, handle employees and upset customers? Are you aware that running a business will run your life, until it is off the ground?
Will you enjoy working the franchise?
Don’t buy a franchise just because you think it will make you a lot of money. You may find later that you do not enjoy the business and it may suffer as a result. If you buy a franchise it should be in an area that you will enjoy for a considerable amount of time.
Are you willing to adhere to the franchisor’s system?
The key to a successful franchise is the unity of products and services customers have come to expect from that franchise. When you open a franchise, you are indicating to customers that you operate exactly as the other franchises within that system. If you are extremely entrepreneurial in the sense that you do not like to conform to a predetermined formula then you should be very careful about buying a franchise.
Do you have a history of success in dealing and interacting with people?
The success of many franchised businesses is based on people skills. The necessity of positive interaction with your franchisor, other franchisees, your employees and your customers cannot be emphasized enough. A negative, critical franchise owner can be a huge detriment to the entire franchise system. You must have a track record of good relationships with employers, supervisors and fellow employees.
Can you afford the franchise?
One of the major causes of business failure is under capitalization. While the franchisor will be able to give you a good idea of the start-up costs, but sometimes these will not be completely accurate due to unforeseen variables. You will need enough money to not only open your franchise, but to run it until it is profitable. That may take a year or so. Remember, it is always best to start out with more money than you think you will need rather than less.
Have you carefully reviewed the legal documents and FOC?
Franchisors are required to prepare a document called the Franchise Offering Circular. This document will give you pertinent information about the franchise. It will also contain the franchise agreement that you will sign. This agreement will govern your relationship with the franchisor for the term of the contract. The FOC is a vital document. It should be studied very carefully and discussed with your lawyer.
Does the franchise you are considering have proven success?
Who are the principal directors of the company? What is their business background and how profitable has their franchise has been? The FOC will contain this information. It is recommended that you hire an accountant to review the financial analysis of the franchise. Do they view it as a solid company? Also, find out how long the franchise has been in business. A new start-up franchise will offer you the opportunity to get in on the ground floor. But it could also mean that the franchisor has not had sufficient experience to fully develop the system.
What do the operating franchisees have to say?
The FOC will contain a listing of all of the franchise owners. It might be a good idea to contact a number of them to discuss their experiences with the franchise. Ask them if the franchisor has followed through on commitments? Do they feel they received adequate training? Would they buy the franchise again? Has their business been profitable? What advice would they give you?
Do you like the franchisor’s support staff?
An important element of a franchise is the continued support and contact you will have with the franchisor. For this reason, you should feel comfortable with the people you will interact with for years to come.
Do you have family support?
Managing a franchise requires great sacrifices of time. For this reason, your family should understand that you will have tremendous demands on your time. They will need to be supportive of your decision to buy a franchise.
Will you succeed or fail when you buy a franchise? Only you can answer that. There are not too many franchise failures, but there are people who fail. Your success or failure depends on you. Evaluate carefully the franchise you desire to purchase and your own attitudes and abilities. Franchise ownership could be the path to successful business ownership for you. |
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