How to identify your "must have priorities" in a franchise!
Franchising represents a viable approach to business ownership. For a price, the franchisor teaches its proven business model and methods to the franchisee who shoulders all operating and financial responsibilities of the outlet.
But just as franchising presents the opportunity to be successful in your own business, it's also a chance to get stung if you choose unwisely.
What follows is a list of questions that I have compiled to help you identify your “must have priorities” the answers to these questions that will help you eliminate most of the companies out there. Then, you can concentrate your efforts on the remaining companies that deserve your utmost consideration.
What is the Industry Trend?
Is the franchise in an industry that is doing well currently and is projected to do well in the future despite any economic slowdown or technological advances, or increased internet use, etc. Look at trade publications and identify the future outlook of the industry.
What is the Total Investment Required?
In general, don't expect a franchise that requires a five-figure initial investment to produce a six-figure income. As with most things in life, you get what you pay for. Look for a franchise that fits your financial situation and requirements. Identify the figure you are comfortable with investing and validate that actual total investment by speaking with existing franchisees. Remember to have enough money left to cover your living expenses during the startup prior to profitability.
How experienced is the Management Team?
Does the management team have executives with demonstrated past achievement and experience in operating the business, in the industry or for other franchise companies?
Are you comfortable with the hours and income potential?
How many hours do you need to work to reach the income level you are striving for? Are you willing to sacrifice your time to achieve your goals? Set your work schedule in your mind and look at business models that fit that potential and return the income you need or desire. If you do not want to work every weekend then make sure you are getting involved in a business that allows flexibility on weekends.
What is the Minimum Number of Employees?
How many employees are you willing or able manage, are you willing to manage minimum wage employees, managing dozens of minimum-wage employees who are constantly quitting or simply not showing up for work may not be something you want to handle. Others accept it as part of doing business.
Investigate whether the existing franchisees are opening additional units?
It doesn’t matter how many units they initially purchased what is important is if they living up to the development schedule, and if not why. Many franchisees have great intentions to build X number of units, but then reality sets in, find out what the realities are.
Watch out for the real estate Lease?
For most retail franchises, the triple net lease of the location is the biggest financial commitment, larger than the total franchise investment.
Are you comfortable with the Image & Lifestyle?
How does flipping burgers, scooping ice cream or cleaning restrooms fit the image of what you want to do for a living? Investing in a franchise will be the most important psychological and financial decision you ever make. Does the typical working day of the franchise you are considering fit your personal image and your desired lifestyle?
This list of “must have priorities” is a very good way for you to filter franchise opportunities and determine which ones warrant your consideration.
Investigating a franchise takes some time but I have seen over and over again that if you choose a franchise wisely, success is almost assured.
Have a question for Jim? Ask or leave a comment below!