The very essence of a franchise is consistency. If you’re not happy to follow someone else’s blueprint, you may be better suited to a different type of venture.
If you’re thinking about getting in on the franchise game, you may believe that your biggest question would be whether to open a fish & chip shop or a car wash. But the real question is whether you should buy a franchise at all.
While franchises are growing in popularity, the sad reality is that many people enter into franchise agreements thinking it’s a fool-proof plan for success. But the fact is that franchises still fail.
A lack of proper screening by the franchisor, combined with a general lack of awareness by the franchisee are large reasons for this.
Franchising isn’t something that should be rushed into. Unlike small independent businesses, which can often be started with minimal capital and then scaled organically as the company grows, franchising generally requires a significant up-front investment. Then there’s the fact that many franchises don’t show a profit for the first year, and preparing financially for this situation is something that franchisees often overlook.
If you’re considering franchising, it’s important to seek out information from independent, unbiased sources and make sure you look into the risks and benefits objectively. Taking the time to conduct thorough research and becoming well-informed can help to mitigate a number of problems right from the start.
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Here are a few questions you should ask yourself before you embark on this journey.
Do you know what you’re in for?
First and foremost, make sure you have realistic expectations. Franchises are a ‘business in a box,’ and you’re buying into an already-successful business model, but that doesn’t mean that it’s going to be all smooth sailing, and it certainly doesn’t imply that it will be easy.
In order for your franchise to be a success, you’re going to have to put just as much work into the venture as you would when starting an independent business. Make sure you’re willing to put in the time and effort before you start.
Are you willing to follow the system?
Franchises are systems-based businesses, and in order to find success as a franchisee, you have to be prepared to stick with the system. The very essence of a franchise is consistency. If you’re not happy to follow someone else’s blueprint, you may be better suited to a different type of venture.
Are you a people person?
Do you work well with others? Franchising means spending a significant amount of time interacting with your franchisor, fellow franchisees, customers, employees and vendors. So great interpersonal skills are a requirement. If you find dealing with others to be drudgery and don’t have a track record of great relationships, you’ll want to pass on being a franchise owner.
Can you afford it?
Buying a franchise because you need a job is one of the worst reasons to start a franchise. Franchises are expensive, and require a significant amount of funding up-front before you can get started.
You’ll have to cover the start-up costs, and have enough capital to fall back on until the franchise begins to make a profit. In many cases, this is at least a year.
You’ll want to make sure you have enough reserves to cover operating costs and living expenses during this time.
Will you enjoy it?
Finally, the all-important question: Are you sure that owning a franchise is something that you’ll genuinely enjoy? While being a franchisee can be a great opportunity for some people, for others, it’s a terrible idea.
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Most franchise contracts run five to ten years — that’s a long time to be locked into a job you hate. If you don’t relish the thought of following someone else’s system and immersing yourself full-time into running a business, franchising isn’t for you.
Still think you have what it takes to be a franchisee? Great! Before you dive in though, you’ll want to make sure you’ve learnt everything you can about franchising, and thoroughly understand what you’re getting into. Take things slowly and do your research.