1851 Franchise breaks down what aspiring business owners need to keep in mind before signing a franchise agreement.
1. The Cost
Knowing how much money you are willing to invest in a franchise will determine what type of brand you’re able to invest in. Along with the cost to purchase a franchise, you should also be aware of the opening inventory and the amount of working capital needed before breaking even. Put your money in a business that you believe in and would be proud to tell your family about.
2. Know Your Passions and Strengths
Love a product before investing in it. Finding and knowing what your passions are will help align your values with a brand that shares similar beliefs. When becoming a franchisee, your ability to manage others will depend on how well you work on the business, not just in the business. Everyone has different personalities and it is important to create a culture where everyone feels valued and is given an opportunity to succeed in more ways than one. Know how your strengths will positively impact the business and your employees.
3. Do Your Research
A great place to do your due diligence is to visit The Federal Trade Commission’s Guide to Buying a Franchise. The website covers everything from the franchise business model and costs to franchisor policies and contractual obligations. Before investing time and money, make sure the franchise you plan to align with has expectations that are reasonable and achievable within a specific timeframe. Finding the right opportunity can include everything from location and ownership to potential multi-unit options within or outside of the market you are franchising in.
4. What does the Franchise Model Look like?
A franchise enables an entrepreneur to operate a business. Most franchise models have a specific cost affiliated with opening a franchise, but all costs and guidelines can vary from brand to brand. When deciding on a franchise, make sure to be aware of the model and how the franchisor will assist throughout the opening and growth stages. The more you know about the franchisor, the better informed you will be when it comes to choosing the right franchise. The franchisor wants to see your location be as successful as you want it to be.
5. How Much Time Goes into Starting a Franchise?
From the initial search and contacting a franchisor to conducting more research around financing and legalities and making the final decision, the process can take anywhere from three to six months. When making this decision, remember that your time investment should reflect your monetary investment. Be ready to put in timely days in order to get the most out of your business plan.
6. How does the Franchisor Operate?
All franchisors are different. Some are based regionally, some are nationally known and some might even extend internationally. New franchises can lead to exciting growth opportunities that might include more risk but have the potential to lead to more reward. Long standing franchises can offer stability and better brand awareness. Whichever way you decide is up to you. The biggest thing is understanding the franchise structure and how that plays into your long-term investment with the brand.
7. How is Success Defined?
When looking at certain franchises, see what the brand’s expectations are within the first week, first month and first year. It’s crucial to envision what success will look like in order for you to execute your passion and accomplish big goals. Know that many franchisors are there to help you achieve results and become a strong member within the community you serve. It can be intimidating to ask for help, but know that assistance along the way can lead to success. Your success will reflect your customers’ brand expectations and loyalty.
8. What Is Your Goal?
Setting goals is a key way to help measure success. Whether that means setting one big goal or having multiple goals that will help you reach that a larger one down the line, having them in place will allow for progress to be tracked on a consistent basis. You should also have measurable goals set up for your employees to track their progress. Having goals for everyone in the organization can lead to exceeding expectations and results.
9. Read the Financial Disclosure Document
The Financial Disclosure Document (FDD) will serve as your go to resource for running your franchise. Litigation information, financial filings, training directions, supplies costs and other expenses that may occur when it comes to marketing and promotional opportunities are all listed there. It is critical to know the ins and outs of what makes a business operate smoothly for you to have the most success. A popular way to help finance a franchise is with a SBA loan.
10. Get to Know Current Franchisees
Developing relationships with current franchisees of the brand you’re interested in investing in will help create a strong network of best practice givers. Ask what they like and don’t like about the franchise and gain any insight that will help you make an informed decision. Any learning opportunity is one that should be taken advantage of when it comes to seeking advice on such a big decision