01 Nov Five Things to Consider Before Buying a Franchise
It can be quite exciting to buy a franchise business, but like any other business decision, this is one that shouldn’t be made lightly. Here are 5 things to consider before buying a franchise:
#1 Are you passionate about owning a franchise?
This is probably one of the very first things you should be asking yourself. Once you buy into any franchise, your life will change significantly and the business will demand your attention 24/7. You may feel you are living out your dream of becoming a small business owner; but if you lack passion which is the major ingredient for success, you may find that the entire exercise soon turns into a nightmare. It’s important to buy into something you feel passionate about as that will keep you enthusiastic and motivated.
#2 Knowledge is important
You need to know and understand the service or product you sell. While this sounds obvious, it’s not uncommon for people that understand very little or have no interest in a certain product, to buy a franchise in that niche. Many people that buy franchises are fulfilling their long held dream to be their own boss, without really understanding the type of business they would like to buy into.
Product knowledge is crucial in marketing your service or product; and in franchises you have to consider aspects such as sales and marketing. While buying a franchise may help with the overall structure setup and branding, it isn’t obligated to handle marketing for you. Often, individuals that buy into franchises expect too much from their franchisor and fail to realise exactly how much operating of the business is their responsibility.
Whilst the new owner will usually get franchisee training in the systems and procedures when they buy the franchise, they will usually be responsible for finding and training their own staff, and managing the day-to-day running of the business with little support from the franchisor.
#3 Check whether you can afford it and create a business plan
This may sound boring, but before you buy a franchise, you need to make sure you can actually afford it. It’s necessary to have at least 6 months saved in a separate emergency fund for contingencies. Buying franchises, contrary to popular belief, isn’t a licence to mint money.
It’s vital that you have a practical and feasible business plan, so that you don’t have to face any unrealistic illusions and surprises along the way. Don’t just look at the cash flow, but take a closer look at the outgoings as well; the former can easily be presented as profitable. You need to take all the hidden costs such as electricity, rent and water into account too.
#4 Is there scope for renovation?
Most prospective franchisees fail to take this into account. But once you settle into the business you may identify that certain products sell much better in the local area you operate in. Certain franchises can be very restricting in regards to your personal choices and flair.
If you feel that you want the freedom to innovate, look for a franchise that will give you the flexibility to get creative to some extent. While you may still have to purchase all the branded, core products from the franchise, you can check how much of control you have in running operating your own franchise. The idea is to find a franchise that will be a good match for you.
#5 Talk to other franchisees in the system
Before signing on the dotted line, make it a point talk to other franchisees. Understand how their experience with this franchise has been; and ask them if given the choice would they buy this particular franchise again?
Following these tips will help you make an informed decision, so you can succeed in your new business venture. If you want to know anything more about setting up a franchise business or want some sound and professional advice, call The Franchise Institute on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435