Entrepreneur Magazine’s Small Business Encyclopedia defines franchising as “A continuing relationship in which a franchisor provides a licensed privilege to the franchisee to do business and offers assistance in organizing, training, merchandising, marketing and managing in return for a monetary consideration. Franchising is a form of business by which the owner (franchisor) of a product, service or method obtains distribution through affiliated dealers (franchisees).”
Buying a franchise takes most of the guesswork out of starting a small business, and if the franchise you chose has a well-designed system and a proven track record or success, you have the potential to be profitable and satisfied with your decision. But franchising isn’t for everyone. Though many of the hurdles involved in opening a business are taken care of by the franchisor, owning a franchise is still challenging work, and you need to know if you have what it takes to be successful before you sign the papers.
There are a lot of things you should keep in mind when you’re considering buying a franchise. Below are some questions to ask yourself while doing your research.
- What are you trying to accomplish? Whether you are looking for something to do for a few years and then sell, or you are looking for the last job you’ll ever have, you need to be very real with yourself about your intentions.
- Do you have enough money? Every franchisor has different monetary requirements for new franchisees. Before you can buy one, you need to know how much liquid assets and net worth you need to have. There are also plenty of profitable franchises to choose from, and plenty of unprofitable ones. Do your research to find out which ones will work for the paycheck you have in mind. Additionally, bear in mind that even if you choose the right franchise to buy, it most likely won’t be profitable the moment you open your doors. It will take time to get to know the business and build a client base before you see real profits. Make sure you have enough money to live off until this happens.
- How much do you want to work? Are you a 9 to 5, Monday through Friday kind of person? Do you plan to have a full-time job and do the franchise on the side? You need to know what kind of schedule you want to keep before you can decide on franchising, or what kind of franchise to buy. Some can be done more as a hobby, and others will require 60-hour weeks. Most new franchises are demanding on time and impact personal and family time. Are you prepared for that?
- What is your skill set? Do some introspection and try to honestly determine what you’re good at. Focus on the business aspect of owning a franchise. Are you good at managing people? Are you a natural born salesman? Can you handle being the face of the company, or are you more of an out-in-the-field person? The answers may surprise you and are a good indicator of whether you would like owning a franchise.
- What type of business would you be happy doing? Take out a pen and piece of paper and in two columns write down what you like doing, and what you’re good at doing. Not everything you write down will be in both columns. Zero in on those that are, and you’ve got something to work with. Buying a franchise is a huge commitment, so finding one that involves things you both like and are good at will give you a higher chance of success. On the flip side, don’t immediately discount a franchise because it doesn’t fit into both columns. Sometimes mixing things up works out fantastically.
Want more information? Read our Blog Why Buy a Franchise?