If you’re interested in buying a franchise, chances are you’re looking to capitalize on selling products and services that come with instant name recognition, along with receiving proven training and support designed to help you succeed. But while investing in a franchise can indeed help to eliminate a lot of the upfront work (like territory selection, lease negotiations, and scouting for reliable contractors and vendors), there are several things that you should know when it comes to what to expect when buying a franchise.
What to expect when buying a franchise:
- Assessing your risk tolerance. Investing in any business is risky, whether it’s a franchise or an independent startup. There is no sure-fire way to completely mitigate any risk, but there are ways to lower it. One way to lower your risk factor is to take a long, hard look at your financial decision-making history. Before you sign the check for a franchise, ask yourself how you handled the risk associated with large purchases or investments in the past. How long did you spend analyzing before making a decision – days, weeks, months? Simply put: make sure you’re paying attention to and can handle the risk of investing in a franchise.
- Understanding franchisor rules. Franchisor rules are designed to maintain product, service, and brand consistency – which means that your ability to exercise certain judgments might be restricted. Franchisors most likely will control site approvals, design/appearance standards, sales area restrictions, methods of operations, and what types of goods or services you sell.
- Understanding financing. You can wind up wasting a lot of your time and a lot of the franchisor’s time if you don’t know where you currently stand financially. You and the franchisor could get excited about a franchise opportunity that you can’t afford. Before you start down the rabbit hole, do a simple net worth assessment by adding up your assets and liabilities. The difference between your assets and liabilities is your net worth, which is something that most franchisors have a minimum requirement for.
- Exploring the franchise selection process. Instead of spending countless hours online searching for the perfect franchise fit, you might want to start out by writing down your personal professional skills and personality traits. Are you introverted or extroverted? Detail-oriented? Highly competitive? Good with numbers? After you’ve identified your skills and personality traits, cross-reference this list with industries that you’re interested in. Only request information from two or three possible franchisors at a time, so you aren’t inundated and overwhelmed with information.
- The need for a business plan. If you need to apply for financing, you need to have a business plan in-hand when you go to the bank. Lenders need to hear your projections before they’ll invest in you.
- Preparing for decision day. From start to finish, the franchise discovery and research process generally takes two to three months – and then it’s time to make a decision. If you’ve chosen a franchise opportunity that’s right for you, that you’ve researched, and that fits within your budget, you should have no problem deciding, “yes.”