Thursday, September 22, 2011

Is owning a franchise right for you?

In the last few years, the popularity of the franchise business model has skyrocketed. Many people are attracted not only by its proven business model but also the ease in owning one. While the success rate for franchises is somewhat higher than owning independent businesses, there is still the possibility that an individual franchise won’t succeed. So, before purchasing a franchise opportunity, ask yourself these six questions:

Are you ready to run your own business?

As an entrepreneur, you can be expected to work more than 60 hour weeks, doing all the dirty work; such as mopping floors, emptying the garbage and handling upset customers. If you are willing to put in the work in the early stages, and see it through, you have a higher chance of success.

Are you willing to completely follow the franchisor’s system?

The most important part of a franchise’s success is the brand consistency that customers find from one franchise to another. By being a franchise owner, you are following a particular system determined by the head office. If you’re an entrepreneurial person, think twice before purchasing a franchise as you may not like to conform to a formula and may chafe against the restrictions.

Are you able to afford it?

Understand what your financial requirements are going to be and then double it! One of the major causes of failure for franchises is being poorly capitalized. Do your research – ask your franchisor what your start-up costs will be, including any detailed expenses such as equipment financing and rent. You will not only need money to open your franchise, but also to manage it until it becomes profitable. And for some franchise businesses, it may take up to a year to break even.

Does the corporate headquarters have a history of success?

You should do your research into the owners of the company, including their business background and successes. Work with an accountant and review the finances of the franchise. Is it solid? Don’t be afraid to ask questions, as it’s their support and experience which will guide your success.

Do you like the franchisor’s staff—those people with whom you will be working?

A chain is only as good as its weakest link. Which means that you should investigate the staff that provides support for your franchise. Make sure that you’re comfortable with them and are able to build a good relationship.

Is your family behind you?

This applies to all entrepreneurs – starting a business, be it a franchise or an independent, will require a lot of sacrifices. Especially in your personal life. For this reason, communicate clearly to your family that you will be busy, and set some boundaries. They will need to be supportive of your decision and are willing to compromise.

Finally, hire the expertise of professionals, such as an accountant and a lawyer. By creating a team, you’ll be well prepared to face any challenges that may come upon you. By evaluating the franchise you want to purchase and your own strengths and weaknesses, you’ll have a pretty good picture whether you’re ready to take the next step in owning a franchise business.