If you’re interested in becoming a franchisee, there are three key areas to consider before signing on the dotted line.
There are three core parts to becoming a franchisor. First, you need to determine if franchising is right for you. Franchising is often referred to as ‘intrapreneurship’. The franchisor creates the system and processes you have to follow as a franchisee, which means you don’t have the leeway of an entrepreneur launching their own business.
Choosing a sector
Second, you need to determine which industry sector you’re interested in. Does retail, fuel, beauty, fitness or the food industry interest you? What skill sets do you possess? It’s important to note that most franchisors do not require experience in the sector of your choice.
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Sorbet for example looks for franchisees with business backgrounds rather than beauty backgrounds. The franchisor believes it is better to teach business people the beauty industry over teaching beauticians business.
Similarly, a franchisee running an automotive franchise won’t be servicing cars themselves – but they do need to understand hiring the right employees, motivating staff, customer service, good invoicing and bookkeeping practices and so on.
Choosing a franchise
Finally, once you’ve determined which sector you’re interested in, you need to choose a franchise to invest in.
A number of factors will influence this decision. First, how much cash do you have? Set up costs vary from sector to sector and brand to brand, and your unencumbered cash and how much you can secure from the bank will determine what you can afford.
Some franchise groups have multiple offerings as well, so you can choose which brand suits your needs and what you can afford.
A key factor at this stage is researching the franchise you are interested in. What do franchisees say about the system? Make sure you ask as many franchisees about their experiences as possible.
The franchisor will give you a list – make sure you ask more franchisees than this. Ideally you want a mix of happy and less-than-satisfied franchisees. No business is perfect, and you want a complete picture.
Be sure to determine which franchisees seem most like you. In this way you will be able to ascertain what aspects of the franchise system will be problematic for you, and which aspects won’t.
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Questions to ask yourself:
- Are you prepared for the fact that your franchise will not break even for 12 to 18 months?
- Do you have the necessary savings to support yourself and your business during this time?
- Are you willing to spend at least a few weeks in this franchise or a similar franchise to understand the realities of owning a business in this sector?
- Have you researched your market, territory and competitors?
- Will there still be a market for your offering in five years’ time?
- Where do your skills lie? What industry are you coming from? Many franchises are looking for business people rather than industry and sector experts.
- Are you able to acknowledge your skills gap, and then figure out how to bridge that gap?