The chances are that you’ve purchased goods and services from franchise businesses in the past without really realising it. Not all franchises are as big as McDonald’s or Dunkin’ with such a wide global footprint. There are also small franchises or even mid-level ones that you can explore on your road to entrepreneurship. When looking at business, franchise opportunities abound. But there are some things you need to consider before getting started.
Franchise businesses – what are they?
Franchise business opportunities are essentially businesses that have a proven track record and successful business model. These businesses and their models are typically replicated in various locations around the country and even across the globe, offering customers the exact same level of service or types of products that the parent company offers. They are a “copy and paste” operation where service provision is consistent with the parent brand no matter where the franchisee may operate from, enabling customers to expect the same level of quality. Franchisees operate the business in different territories and adhere to the guidelines set by the parent company. Although they are operating under a particular trade name, they are still considered their own boss. And there are many benefits that come with this.
For example, working with proven business models adds that extra level of security, ensuring that the business thrives in a competitive environment. Other factors to consider include the ongoing levels of support and the marketing and advertising assistance provided by the parent brand. There is also ongoing support and training provided and the ability to share knowledge with the entire network of franchisees. Overall, it’s an investment that’s far more likely to get the support of a lender than a startup beginning from the ground up.
How to buy into a franchise
If you’re already convinced about starting your own business under the umbrella of a franchisor, you will need to ask yourself some important questions in order to lay down the groundwork for your future. So, if you’re wondering how to buy a franchise, take a look at some of the prerequisites below.
- Introspect
In order to buy a franchise, you must first go through the process of introspection. You need to identify your main goals – both personal and professional – as well as your strengths and weaknesses. Figure out where you ultimately want to end up. What are you comfortable doing and what are you not comfortable doing? What previous experience do you have and how might that aid you in your future endeavours?
- Choose an industry
There are literally hundreds and thousands of franchise business opportunities that you might consider. But you need to narrow down your options to something that you can commit to for the medium to long term. From pet care and grooming to child entertainment, home care for the elderly and even home maintenance services – you have a lot of options. You therefore need to consider which ones meet your interests, knowledge, experience and budget.
- Decide on your role
Some franchises require that you play an active role in the day-to-day running of your business. Others, on the other hand, apply a more hands-off approach. You need to be clear with yourself about what type of role you want to play in your business and whether managing staff on a daily basis is something you could do for the foreseeable future or whether you prefer to hand over the reins to someone else who will oversee the management of your franchise business.
- Determine your budget
In many cases, when you’re looking for a franchise, you will also need to take careful stock of the fact that these don’t usually come cheap. Yes, there are more affordable options, while others are costlier and may require external financing. How well do you fare on that score? Do you have a good credit history and is your lender likely to give you a loan should you opt for it? What are your personal contributions and assets that you may wish to bring to the table? Remember also that in addition to the franchise fee and initial investment, you will, in most cases, also be required to pay royalties to the franchisor as well as fees for marketing and advertising.
- Figure out your long-term commitments
A franchise is a long-term commitment. Therefore, you need to be able to carry out your duties for the foreseeable future. You will also need to determine how long you’d like to stay in the game for, whether the relationship with your franchisor is based on mutual respect and understanding, the risks of franchising as well as what your exit strategy will be when you get a franchise. Regarding the latter, you may either wish to sell it on or pass it down to someone from your circle to continue running. These are other considerations you should think about.
- Study the franchisor
Finally, once all of the above has been done, you’ll also want to spend some time studying the franchisor you’ve chosen to partner with. You need to dig into their background and determine what their history in the business is, how long they’ve been operating, where and how they’ve succeeded.
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It’s advisable to speak to a franchise broker to also help you examine the rules and restrictions which are apparent in the Franchise Disclosure Agreement (FDA), whether there is any litigation history and if so, how extensive it has been. And further to this, you need to tally up the franchisor’s financial performance, which will also be evident in the FDA.
In conclusion
The best franchise for you will be different to the best franchise for another person. The beauty of franchise opportunities is that they are suitable for almost anyone and they offer so much variety that you’re very likely to find what you are looking for to suit your particular personal and professional needs. The process of figuring out how to buy a franchise may seem daunting at first, but due diligence is required when making such an important life decision.
