When interested in becoming a franchise owner, individuals tend to move too fast and get burned. This is because many people fail to do the necessary research before investing in a business, and ultimately wind up floundering.
There are many reasons why people can struggle with a franchise, but many of them come back to failing to do enough research in the beginning. There are ultimately five things anyone should do before even looking for a franchise they might be interested.
1. Consider Yourself
This is a hard step for many to do, but is one that must come before anything else when considering franchise ownership. Before taking any steps like researching current franchises, you need to take a good, hard look at yourself and identify strengths, weaknesses, and just what you are interested in out of a business.
This is a difficult step because it requires being brutally honest with yourself for the sake of the business, as well as limiting yourself early on to just what you can do. For example, let’s say you are great at budgeting but terrible at management. Or, maybe you enjoy being creative but many restaurant franchises adhere to a specific menu.
There are other considerations as well. Do you want a small business that can be managed during normal hours, or do you want something difficult and lucrative that will require overtime and extra personal investment?
The answers to these personal questions will affect just how much you can achieve and what franchise to buy.
2. Think about Costs
The next step, before doing any research into the available franchises themselves, is to make a clear outline of the overall costs of investment. You need to answer the following questions and be honest with the answers:
- How much financial investment will be needed up front?
- How much money needs to be invested in the company on a monthly basis?
- How much can I afford to invest?
- How much do I need to make to earn a profit on my franchise?
- Do I need to buy property first?
- How much will the franchise company help me when it comes to getting started?
- Do I need to take out a small business loan?
Finances can be difficult to talk about, but you need to be honest with yourself about just how much money the franchise will cost and what you can expect to earn on an average basis. Assessing your own financial situation before investment can also help you weed out businesses that won’t work for you.
3. Talk with Other Franchisees
This is the best way to get honest feedback about what it is like to be a franchise owner. If possible, visit local franchises in your area and ask if you can speak to the owner about what they like and dislike about owning the business.
Many times, they can tell secrets to success as well as the harsh realities of owning a franchise. Some of them might also know the deep, dark secrets of the franchising industry, and it’s always good to have some insider knowledge.
4. Consider Hiring Help
Many people imagine they have to go about the process of buying a franchise alone, but such a thought couldn’t be further from the truth. If you are just starting to look for the best franchises to invest in, consider consulting a professional company that focuses on investment, successful franchising, and business management.
These companies are built and staffed by experts in business and marketing who can help you identify the trademarks of successful franchises for sale. They can then tell you which are the best franchises to buy, and can also help you through the process of understanding and signing contracts as well as realizing your own obligations as a franchisee.
5. Investigate Business Models
This is a major step that many people ignore in their excitement to become a franchisee and small business owner. The truth is that many available franchises to buy might be hiding some dirty secrets about their business models and overall success rates.
Everyone wants to be successful, and that includes the food franchise in which you are interested. Before seriously looking into a specific company, research just how often a franchise succeeds, whether or not the market for a particular business is growing, and whether or not there is enough interest in your area for that type of franchise.
For example, let’s say you want to invest in a restaurant franchise. You live in a location filled with Italian restaurants, but almost none that sell high quality burgers. While you might be tempted to go Italian because you enjoy the food, the truth is you would have better luck filling the burger niche because the market is not already glutted with other businesses of that type.
You also need to remember that many franchises close down at the same rate as any other small business. This means about half of all franchises close within two years, while 2/3 shut down within five. Do your research carefully and don’t be afraid to do some information gathering on the regional market.
Combined, these five steps can be a lot of work. However, they are worth it because of the sheer wealth of information they provide. You will not only have a better understanding of the franchise industry in general, but also of yourself and your personal situation.
Don’t let all of the preparation for owning a franchise scare you. The goal is to be as prepared as possible before investing so you increase your chances of being successful. After all, many businesses fail simply because the individuals who own them did not do enough market research about the area or did not develop the managerial skills necessary to stay afloat.
So, before looking for a franchise to buy, sit down with a notepad, pencil, and calculator. Sketch out a rough business plan, make some calls to local franchises like Zac’s Burgers, and be prepared for some research. It will help you become more successful overall.