Are you looking for a business opportunity that offers you the support of an established brand and less risk than starting your own business from scratch? Franchising might be the perfect option for you. But before jumping into a franchise opportunity, there are seven critical areas to research first.
1. Costs
Understanding the total costs associated with a franchise is essential to research the opportunity. Commonly, these costs will break down into two categories: initial fees and ongoing fees. Initial fees typically include the cost of signing the Franchise Agreement, any start-up supplies needed to get the business running, and training expenses. Ongoing fees might include royalties and advertising funds that must be paid to the franchisor regularly.
2. Territory
When researching a franchise opportunity, you must understand what type of territory you may have access to. When you sign your franchise agreement, it should specify which areas or zip codes are available for exclusive development by the franchisee. It’s also important to know if the franchisor is planning to open any additional franchises that might be close to yours.
3. Support
Before signing on with a franchise opportunity, it’s important to understand the type of support they offer. Some franchisors will provide various ongoing support services, such as training programs and technical assistance. In contrast, others may only offer limited support after you have opened your business. If you are new to running a business, ensure that the franchisor offers enough guidance and resources for success.
4. Performance History
Researching the previous performance history of a potential franchise opportunity can help you evaluate its potential financial success. Find out how many locations are currently operating, the age of the franchise system, and how successful previous franchisees have been. This can give you a good indication of whether the franchise is a viable investment or not.
5. Reputation
Find out what other people are saying about the franchise opportunity. Check online reviews to understand what customers and former employees think about the business. Also, look for customer complaints that indicate potential difficulties with purchasing items or services from the franchise.
6. Business Model
Franchise opportunities come in many shapes and sizes, so it’s important to understand exactly how your chosen business model works before investing in it. Find out if the franchisor uses a standard business model across all franchisees or if they offer an individualized approach. It’s also important to understand what product or service the franchise offers and how it is marketed to customers.
7. Exit Strategy
Finally, consider your exit strategy before investing in a franchise opportunity. If you decide that the business isn’t for you after all, will you be able to sell your franchise easily? Are there any restrictions on reselling your unit? Considering these factors can help ensure that you don’t inadvertently become locked into a long-term contract with limited options for exiting the agreement.
Investing in a franchise opportunity can be a great way to become your boss and make money. But it’s important to do your research first and understand the costs, territory, support, performance history, reputation, business model, and exit strategy of the franchise before investing. This will help you decide if the franchise opportunity is right for you and ensure that your investment will pay off in the long run.
