Franchises allow you to own and operate your own business. They’re available in different industries and require varied investments. Before you buy a franchise, understand how to choose the right one for you.
Know Yourself
Honestly evaluate you and your needs before you invest in a franchise. Ask several key questions that help you choose the franchise that’s a good fit for you.
- What do you hope to gain from a franchise?
Will it replace your full-time income, provide extra money you can invest or be the first store in your franchise empire?
- What are your strengths?
Your strengths and skills, including the ability to cold call, interact with customers and train employees, affect your ability to operate a franchise successfully.
- How involved can you be?
Be realistic about how much time you can invest in the business, particularly if you plan to keep your full-time job, so that you don’t overextend yourself or your resources.
- How much money do you plan to invest?
The total investment includes franchise fees, inventory, equipment, working capital and other costs and ranges from $10,000 to more than $200,000. Also, remember that you need enough money to live off of while your new business grows and becomes profitable.
- What’s your exit strategy?
It seems strange to think about ending your franchise before you’ve even chosen one, but many franchises include stipulations that make selling difficult, so you need to know if you plan to pass your business onto your kids or sell it in five.
Narrow Down Your Options
After you know yourself, narrow down your franchise options. Decide if you want a retail, non-retail, industrial or home-based franchise. Then choose an industry. When creating your short list of options, use logic rather than emotion. For example, you may enjoy working as a mobile dog groomer or tax professional, but does that franchise match your goals and skill set?
Do Your Due Diligence
You’re now ready to finalize your franchise purchase. Be sure to do all your homework so that you’re not surprised by fees or other challenges.
Your first step is to review the Franchise Disclosure Document (FDD). It’s a 100-150 page document that answers questions about the franchise costs, rules and restrictions, franchisor’s litigation history, financial performance representation and type of training and support offered.
You should also meet with your franchisor. Make sure you’re on the same page regarding business philosophies and management style.
Talk to other franchisees, too. Get real world answers to your questions as you make sure this business is right for you.
