Owning a franchise is a great way to enter the world of small business ownership. It offers you an amazing opportunity to switch from a full-time job to being your own boss. Nonetheless, franchising comes with its own fair share of challenges. That’s why it pays to know what you are getting yourself into.
In this explainer article, we’ll walk you through five key things you need to know about franchising.
What is your Relationship with the Franchisor?
As a franchisee, are you working for the franchisor or yourself? In most cases, a franchisor-franchisee relationship is more of a partnership than anything else. You are both important to the big picture. Sure, the franchisor is responsible for the business concept, the strategy, and franchise model, but it is your role as a franchisee to see to it that they are implemented.
On a more basic level, the franchisor deals with marketing and advertising. And you’re supposed to pay a royalty fee in return. It’s a symbiotic relationship.
Every Franchise Has Rules
The corporate arm of a franchise is tasked with creating network-wide rules. All franchising companies have several different rules, and they need them. It is only this way that franchises can maintain consistency in their services, products, and overall brand. So, before you commit to becoming a franchisee, do familiarize yourself with them.
Talking Finances
It is crucial to know your financial standing before shopping for franchises. Before getting excited about opening a McDonald’s franchise, for instance; ask yourself: do you have $750,000 in liquid assets? Do a simple net worth check to narrow down yourself. Nearly all franchisors have a minimum net worth and liquidity requirements.
Finding the Right Match
Not all franchises are created equal. That’s why you should do a self-check. Is this franchise for me? Instead of scouring online for thousands of franchises, grab a pen and paper and note down your key professional skills. What are your top qualities – the traits that define? Are you an introvert or a social person? Do you tend to be overly competitive? Do you lean toward the big picture or the fine details? The answers to these questions will help you find a good match in a franchise.
Do Your Research
Once you have found franchises that meet your budget and skill set, it pays to do a little homework. The first step is to reach out to a franchise development rep. The trouble is that franchise reps might not answer all your questions, especially ones that have not been disclosed on the Franchise Disclosure Document.
