A tried-and-tested idea, combined with ongoing support from the franchisor, sounds like an efficient and risk-reduced option for many entrepreneurs.
However, just like any business, there are no guarantees that your franchise business will be a success. You can minimise your chances of failure by following these key steps when considering franchise opportunities.
1. Do some background research
Most franchise brands publish information about their franchise models on their websites or third-party directories, accompanied by case studies and even video testimonials from existing franchisees. You can also request further information via a form, email, or phone.
During your research, find out if their core values, work ethos, and long-term vision aligns with yours.
Also, it’s essential to keep an eye on the latest trends and consider what people in your area want.
Speak to the appropriate trade association for the operational view of the type of business you are interested in. Use the internet to research the business and sector in which you want to become involved.
2. Assess your finances
Each franchise has specific rules for the way franchisees must run their units. These can include specific items or services sold, employee pay scales, software programs used, etc. Can you afford them?
From the beginning of your process, assess and understand:
- What you can afford to invest; and
- How much you are prepared to borrow.
Work out the returns that the franchise will generate for you – keeping in mind that the figures on which they are based are verified, i.e., historical trading figures of existing outlets.
Also, consider working capital requirements while establishing your business without the benefit of any immediate profit.
Can the business sustain your lifestyle?
Do this right in the beginning before you become passionate about something that you cannot afford.
3. Contact existing franchise outlets
If you’re looking for the perfect franchise and already know someone who owns or work within the franchise system, talk to that person.
They will be able to point you in the right direction. Remember, finding the right franchise is about exploring all your options, so make the most of any contacts you may have in the franchising sector.
4. Choose the right location
Every franchisor has a specific set of requirements for selecting a business location. Typically, this information will be included in the Franchise Disclosure Document.
Some franchisors have consultants in various regions who keep track of all commercial developments and work with real estate agents. Find out who they are. Don’t forget to investigate whether residents will want to buy goods or services from your franchise outlet.
Other important considerations related to a location are:
- Traffic patterns and access – Is the site located on a desirable side of the street? How convenient is the access to your outlet?
- Can customers easily turn into your parking area and exit it just as smoothly?
- Will your storefront and signage be visible from the main traffic flow?
- Who are your competitors in that location?
5 Don’t rush into signing those papers
Before taking ownership of a franchise, you must sign a franchise contract. Franchise contracts are usually detailed and lengthy and are not something you want to sign without reading and understanding all the terms.
If your franchisor tries to push you into signing quickly at any point, it may indicate a problem with the contract. Proceed at your comfortable pace, or find a new franchisor who will not rush you.
