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Every year, aspiring entrepreneurs jump into franchising without researching the pros and cons. Often, this leads to disaster.
In a time when opening a McDonald’s restaurant can cost $1 million, purchasing a franchise is the biggest life decision you’ll make, shy of getting married and buying a house. A wrong choice could be a $1 million mistake.
Here are a few key questions you need to ask as a would-be franchise buyer.
1. Should I make this decision alone?
Too many new franchisees make a snap decision about the franchise they want, based on liking a product or even a tip from a friend. There’s a lot of information in the Franchise Disclosure document all franchisors must file with the SEC, but few prospects read these or tap the wisdom of an experienced franchise consultant who will typically know hundreds of franchise brands.
For example, you may want to invest in a franchise aligned with one of your passions. Just remember that a franchise isn’t a hobby, but an investment — so seek out expert advice to make sure you choose a proven, well-performing business.
2. Do I understand the business model?
While most people are familiar with Subway or McDonald’s, fast-food restaurants are only one type of franchise business. Much of the industry’s recent growth has been in service brands: everything from dog-walking to janitorial to tax prep.
What the owner does in each type of franchise also varies greatly. You may be interested in buying a Subway franchise, but consider the logistics first. That’s a business that is open 16 hours a day that you have to staff and keep the lights on, but only has customers from 11 a.m. to 1:30 p.m. Taking that into account, is it still a business you would want to run?
3. Who will I be in business with?
When you’re a franchise owner, you’re going into business with the operators of your brand. Too few new franchisees take the time to research the company culture, personalities and corporate-team experience, or lack of it. Be sure to go to your brand’s Discovery Day and watch the team in action.
Discovery Days allow franchisors and prospective franchisees to meet and get to know each other. It is a great opportunity for a prospective franchisee to visit the corporate headquarters and meet the executive team and for both parties identify if there is a solid match for a partnership.
4. Does this franchise fit my lifestyle?
Many C-suite refugees look at franchising as a way to possibly achieve a better work-life balance. But depending on the franchise model, you could find yourself working more than ever. You may be interested in a fitness franchise, but the 24/7 model of many gyms won’t work if you’re not ready to quit your corporate job.
So, in this case, you may want to look at a business with a more flexible model you could work in your off-hours with a more family-oriented culture.
5. Is franchising a fit for me?
Franchisors want their franchise owners to use their proven systems and methods to deliver a consistent customer experience. If you’re a highly creative entrepreneur, being locked into a franchise’s approach may not be the best fit for you. If you’re independent and have a lot of specific ideas you want to implement, you may want to think about starting a business from scratch instead.
June 3, 2019 at 08:07AM
Forbes – Entrepreneurs