How to Become a Franchise Owner
If you’ve always wanted to own a business but don’t have the network or support to do it, consider becoming a franchise owner. A franchise business is beneficial because it offers a structure, model and system that is already in place. All you need to provide is your business knowledge and expertise! Before you start looking into different franchise opportunities, consider what it means to be a franchisee by reading the following guide.
How to Figure Out What You’re Passionate About
Before you become a franchise owner, think about your career goals and preferences. Owning a franchise requires a large financial commitment and time dedication. Read the following tips to figure out if you are ready to buy a franchise.
Tip #1: Quiz Yourself
The most successful franchisees have similar personality traits, including the ability to follow orders. As a franchise owner, you’re expected to communicate the franchise’s business model and operate within a regulated business structure. Franchise owners are not creators. They use their skills to implement an established system. If you enjoy taking creative control, perhaps you’d be better off starting your own ventures from scratch instead of joining a franchise business.
Tip #2: Analyze Your Finances
Are you financially ready to buy a franchise? Well, that depends on the franchise’s fees, royalties and other expenses. Aside from these fees, consider the cost of marketing strategies. The first few months of business may not end in profit, so be sure you have the funds to cover your business expenses.
Tip #3: Find Your Strengths
There are hundreds of thousands of franchise opportunities in areas like food and drink, hospitality, tourism, gaming, party services and more. To find the best one for you, consider your strengths. Perhaps you have a degree in hospitality management and have experience working in a hotel. Becoming the owner of a franchise hotel or condominium may be the best option for you.
How to Determine the Costs and Time Investment
As a potential franchisee, it’s important to be fully aware of the financial commitment and time investment that you’ll make. Owning a franchise may be more cost-effective than starting a business from the ground up, but there are still many costs to consider before investing.
Tip #1: Think Beyond the Fees
The franchise you’re looking to buy will outline the exact amount of money you need to open a business. However, think beyond these fees. Consider attorney fees, building costs, insurance, equipment fees and the cost of acquiring all licenses or permits that come with a franchise business.
Tip #2: Expect to be Busy
If you enjoy having time off and vacationing frequently, you may want to rethink becoming a franchise owner. Regardless of whether you’re going to directly manage the franchise or plan to hire a team, plan to spend most of your time building it up. This means long days on your feet, behind a desk or on a computer, depending on your franchise. Your friends and family should be made aware of your business venture, as you’re going to have your hands full.
Tip #4: Be Willing to Risk It All
Opening a franchise is risky. Even if you have the financial means to own a franchise, are you willing to risk losing it all? The franchise may already be a multi-million dollar company, but that doesn’t automatically mean your business will succeed. Understand the risks before jumping into a franchise opportunity. Even the most profitable franchises can come with a big risk.
How to Analyze the Environment
Buying into a franchise is a big decision. There are many things to consider, including the history of the franchise for sale. Read the following suggestions for analyzing the environment before owning a franchise.
Tip #1: Look into Litigation
It’s not uncommon for large franchises to have a history of legal cases, especially if they’ve been in business for a while. Big corporations may deal with dozens of cases each year. However, if a small franchise business has several cases, it may be cause for concern.
Tip #2: Research the Industry
The best time to buy a franchise may differ, depending on the industry in which you’re interested in working. Buying a fast food restaurant, for example, has become riskier in recent years due to the influx of healthy options and interest in fresh food products. Evaluate the industry’s market by looking at the stock exchange and reading articles about the industry’s success.
Tip #3: Study the Competition
Does your prospective business have a global competitor that could potentially overtake your own? It’s important to research your own franchise, as well as its competitors to evaluate the risk. Read up on their business models, review financial projections and tap into public perception of both. If your potential franchise opportunities are losing ground to another businesses, it may be a red flag.
Tip #4: Analyze the Company
Since you’re going to be a part of a franchise, go back to its beginnings to understand all facets of the organization. Read as many articles as you can find about the foundation of the company and find any controversies that may have plagued it. Once you have a clear understanding of how the company came to be, you can make a better decision on whether you’re willing to be a part of it.
Learn About Talking to Other Franchise Owners
Doing research on the franchise isn’t enough to completely understand what it would be like to own a business. Talk to other franchise owners and get their honest opinion on working with the company. Here are a few important questions to ask other owners before you buy a franchise of your own.
Are you happy with your relationship with the franchisor?
All franchisees agree to a contract, which outlines the expectations of both the franchisor and franchisee. Beyond the contractual agreements, ask whether the individual enjoys working for the company. He or she may reveal slight flaws in the support or guidance system from the franchisor, which could make or break your decision about owning a franchise.
Do your earnings match what was stated?
Always ask about earnings. Before buying into a franchise, the franchisor will present a sales plan that outlines the expected earnings by quarter. Asking other franchisees if they are earning what was stated helps you more accurately determine your financial costs. Ask at least 10 other franchisees, not just the ones at the most profitable franchises.
Did the training prepare you to run the business?
Franchisors provide all new franchisees with an operations manual and initial training period. It’s important to determine how helpful this training program truly is. The franchisee’s honest answer helps you decide whether you can take on this venture in full.
Additional Resource: Business & Franchise Opportunities– Entrepreneur
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