One of the easiest ways to start a new business is to purchase a franchise. Franchises come with well-known brands, extensive know-how and support, and an established customer base. However, with so many franchises to choose from, potential business owners often struggle to decide. Here are some factors to consider when selecting a franchise to buy:
1. Passion
When you buy a franchise, it is going to be a major part of your life for many years to come. It is wise to select one that operates in an area that you are deeply interested in and enjoy. The idea that your job should be your passion definitely applies here.
2. Available Territory
Unless you enjoy commuting, make sure the franchise has available territory near your home. As the owner, you are going to be spending a lot of time at your new business, and not necessarily during standard business hours.
3. Buy-In Cost
Before you start your search for a franchise, sit down and ascertain how much money you have to spend. Different franchises have different buy-in costs, and you don’t want to invest every last dime you have in one. Make sure the franchise you are interested in falls within your budget. Carefully examine all of the fees, including required payments to mandatory vendors and royalty payments.
4. Pay a Visit
Go visit several nearby operating franchises of the brand you are interested in. Ask yourself the following questions:
- Are they busy?
- Are they well-run?
- Do they provide good customer service?
- Are they consistent with the brand?
You may be tempted to think “Well, I could do a better job” but customers don’t think that way. If they have a bad experience at one location, they tend not to patronize that brand anymore. You do not want to buy into a franchise that has a bad local reputation due to one poorly run franchise outlet.
5. Check Out the Competition
Likewise, go visit the local competition for your prospective franchise and ask yourself the same questions. This is a good opportunity to take stock of the local competition as well. If the local area is glutted with similar businesses, your franchise may not be very profitable. There are only so many customers.
6. Investigate the Rental Scene
In addition to buying into the franchise, you will, in most cases, need to construct an actual store. Take a look at the local rents for prime and not-so-prime commercial sites. Think about what type of customer will be attracted to your franchise and decide if you can afford to build a store in a location that will attract customer traffic.
7. Read the Fine Print
Once you have settled on a possible franchise, have a long, frank conversation with the franchise’s representative. Then, carefully read through the Franchise Disclosure Document, especially the fine print. Ask a contract lawyer to go over the documents before signing anything. Remember, although a franchise can be a profitable investment, nothing is guaranteed. You don’t want to take on too much financial risk.
