Franchising is one of the most appealing and efficient ways to become a business owner. Some might say the benefits of franchise ownership outweigh the benefits of starting a business from scratch by yourself. Franchising certainly saves with the ramp-up time when you consider the operations, brand name, and products/services that have already been established for you. But, with so many franchises to choose from, how do you make a decision? We can make that process easier for you. Read on and follow the steps to choosing a franchise.
As you may have seen in our post about the many different types of franchises, there are several business models in which you can invest. The terms and agreements offered by each individual franchisor will impact the success of the business.
The most successful franchises are those that treat their franchisees as business partners. They care about their network as an extension of their business. So, when you are exploring your franchise options, make sure to ask other current franchise owners about the type of relationship they have with the franchisor.
Steps to Choosing a Franchise
- The franchise is your business, and you need to make sure that it is interesting to you. You should enjoy working with the people in the business. So, evaluate whether your interests match those of the franchise system.
- Determine how much time and involvement you can invest in the business. You should find out if you want to take an active or passive role in the operations of the franchise.
- The next step is to talk to other successful franchise owners. Listen to how they run their locations and replicate what works in yours.
- Then, determine the amount of financial investment you have. Calculate and strategize appropriately so that you can make the right financial decision. Consider talking to an accountant or professional business coach to help you in the final say.
- Research the market demand. Consider how saturated a given business type is in your local market. You may also want to attend franchise conferences to gain more ideas.
- Then, learn business operations from the franchisor's perspective. Attend their expos and training sessions.
- Now read and understand the Franchise Disclosure Document (FDD). Here, you should get the advice of an attorney and financial advisor. Especially, pay attention to the dispute-resolution terms.
Easiest Way to Narrow Down Your Choices
Franchises exist in every industry and your options are limitless. Narrowing down these choices is the ultimate goal. Firstly, make sure you have an interest in or passion for the business you are choosing. Another important note is to consider the support you get from corporate headquarters. Learn what is provided to you when setting up the business. Here are other factors to consider when choosing the right franchise:
Most franchises require prospects to have a minimum amount of liquid capital (cash and assets easily converted to cash). Make sure you have calculated what you can afford and decided on the amount of money you are prepared to invest. Different industries and business models require different budgets.
To ensure continuous growth, franchisees need to evaluate the investment and long-term returns. Then, you should consider other personal factors such as income and lifestyle. With these variables, you can estimate how much you are able to invest in the business.
Role in the business
Which role are you going to play in the franchise? Some entrepreneurs hire staff to manage business operations. Other franchisees love to be hands-on and run the business themselves.
Deciding on your role in the business helps you form the administrative needs. The secret to seamless business operations is ensuring that you do what you love. Rhoda Olsen, the CEO of Great Clips franchise, says that you should picture yourself doing the job daily. If you want to lead the establishment, then you might decide to become its manager.
Your Strengths and Weaknesses
Knowing where your talents can be used best in the business will serve you well. An entrepreneur who understands their strengths and weaknesses will find it easier to make decisions.
Find opportunities that allow you to focus on your strengths. For example, if you are a good marketer, you can hire personnel to manage other areas of the business.
When you decide to become an entrepreneur, write down your goals. Are you looking to make money or just become your own boss? Dan Martin, the president of IFX, says that you should figure out your personal goals. Then, form the franchise around those goals.