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Investing in a Franchise: 3 things to consider

Guest post by: Nick Strong

Article Overview: Avoid three common mistakes when investing in a franchise. We give some helpful tips to help you invest wisely and make the most of your franchise business.

Investing in a Franchise: 3 things to consider

Its apparent that franchising can be a great way to setup a business, nonetheless, you'll find on the web alot of horror stories concerning people losing capital, their franchise failing, etc. Obviously there are no guarantees but with a little careful thought and examination, it's possible to lessen the potential for failure as much as possible and do your best to make sure your franchise is a success. There appear to be some regularly recurring issues so heres a small number of ways to avoid them:

Mistake 1: Not checking the validity of the Franchise owner

I’ve come across comments online where it sounds as if people have thrown capital at a downright scam! Understand that you will likely be paying a substantial sum of money to the franchisor as start-up ‘franchise fee’. Along with this, you are going to be building a long term business rapport with them so its vital that you know as much in relation to their background and past history as possible. Online is really a great way to search for the company and research its background. Its also worth investigating the Directors past history to see what other businesses they have been, or still are, involved in. Other beneficial sources of company information can be the Companies House website, opening talks with the franchise sections of the major high street banks and specialist franchise consultants who could be capable to offer you some industry thoughts on any franchise opportunity you might be researching.

Mistake 2: Not speaking to those that are currently performing the job!

When you are purchasing an item then the very best reviews and recommendations come from friends and others who freely impart their opinion on it. From this you can make a well informed decision of whether you might purchase a product. This also is right for a franchise business. Make sure you obtain a list of some franchisees from the franchisor as ‘references’. Make contact with them and, if workable, plan to meet them to get a feel for what you'll be doing. They're likely to be your top source of opinion on how helpful the franchisor is and how well the franchise performs for them on a daily basis.



Mistake 3: Thinking a Franchise opportunity carries a warranty!

There can be a feeling that since a business is known as a ‘franchise’ it is in some way a certain winner. The truth is that you will be the person who chooses if your franchise succeeds or fails. A franchise business is simply a business formula that has been proven to make a profit if it is ‘worked’ in the proper manner. The important thing here is the word ‘worked’. Comparable to every other business, a franchise necessitates a good deal of hard work and dedication. Ensure you have the complete backing and encouragement of your family as it requires alot of time to build a winning business.

Related Articles
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  Seven Questions to Ask when Starting a Franchise
  Purchasing a Start-Up Franchise? Here are some Advantages and Disadvantages
  Why Franchises are Good Investments
  Use a Franchise Attorney When Investing In a Franchise!

Article Tags: franchise, franchise business, franchise opportunities, franchises



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: HOW DO I STAND OUT FROM THE REST? - [quote="kellyandandrew":i8cu0zo4]With so many diferent onilne businesses to invest in, how do i stand out from the rest to attract people. I know there are some fantastic business minds out there and would appreciate a bit of advice![/quote:i8cu0zo4] Investing in any business is not an easy task in today's competitive market. I suggest before investing in any online business you should consider a lot of things in your mind. The things you should consider are like competitor's sale, online sale of your firm, how much visitors to site daily, what are profit rates and many more.


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