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Consider These Three Factors Before Beginning the Franchise Discovery Process

Among all of the things to be taken into consideration, 1851 highlighted three key factors prospective franchisees should consider before beginning the discovery process.

For many entrepreneurs, the decision to go into franchising stems from the yearning to go into business for themselves… but not necessarily all by themselves The franchise model means that a person is putting their money into a business that’s proven to be successful. However, there are still quite a few decisions to be made in terms of the business and how they’d like to set it up from the get-go. With around 750,000 franchise concepts from which to choose, it is essential to establish the fundamentals of what one wants their business to be before diving into any specific opportunities.

So, if the franchising route is the one you choose to travel, have no qualms. 1851 Franchise highlighted three key factors that entrepreneurs should take into consideration before beginning the discovery process. 

1. Budget

First and foremost, anyone looking into buying a franchise will need to determine the amount of money they are willing to invest in a business. As the Federal Trade Commission (FTC) points out, there are multiple costs and fees typically associated with franchising in terms of initial and ongoing fees. In almost all cases, there’s an initial franchise fee to be paid upfront in order to get started, and this fee can range anywhere from a few thousand dollars to a few hundred thousand dollars. What is this fee? Franchisees are paying franchisors for the rights to the business, which includes the right to use the brand name, any assistance they’ll provide and any opportunities they’ll supply you with in the future. 

In addition to the initial franchise fee, you’ll be expected to front the operational costs, which can include everything from real estate and rent to inventory and equipment. And, more than likely, you’ll have to pay your franchisor a royalty fee based on monthly or yearly gross income. Lastly, your franchise agreement may require you to contribute to an advertising fee to build local and national awareness for the brand. 

Expert tip: When determining your exact budget, ask yourself: How much do I have available right now to invest? How much am I willing to borrow in order to pursue this opportunity and continue down the line? What other fees will I be expected to pay in the future as I continue down the line?

2. Level of involvement

Another factor to be taken into consideration is the level of involvement in day-to-day operations you’re seeking. Are you looking for a business that’s home-based, office-based or retail-based? How much time can you commit to the business? Do you want a business that’s 9-to-5 or one with a more flexible schedule? This is an important factor to consider, as it can determine what franchise opportunities are a good fit for you.

Your model of ownership should also be considered. Do you want to be the owner/operator, an executive/absentee owner or a blend of both as a semi-absentee owner? Each situation comes with its own degree of responsibilities and it is essential to determine which you wish to hold before any further decisions are made. 

Expert tip: When deciding which model of ownership you want to hold, conduct an honest assessment of your own abilities—including your strengths, weaknesses and personal life priorities—to determine which model and level of involvement is the right fit for you. 

3. Degree of autonomy

When searching for a franchise brand to invest in, it’s also important to consider the degree of autonomy you wish to hold in the business. Do you want to be part of a brand where every single aspect is laid out for you, or do you want to be able to figure some things out for yourself? If so, which aspects are most important to tailor to your preferences? In regard to design, do you want a unified look or the freedom to design your location as you see fit? 

These questions (and many, many more) are all important ones to ask yourself and your potential franchisor. However, it’s important to realize that when you are becoming a part of a franchise, you are choosing to become a part of someone else’s brand—which usually means uniformity. In most cases, franchisors will control how franchisees conduct business, ultimately restricting your autonomy in business decisions. Franchisees should be comfortable working with corporate brand representatives and implementing franchisor-established best practices. 

Expert tip: Do your due diligence and make sure you ask and understand which aspects of the business you will have control over and which you won’t. Understanding where you have the freedom to make your own decisions can eliminate any future conflicts between both parties.