As you probably know by now, purchasing a franchise is no small decision. You need to be prepared for a whole lot of work, from researching the type of franchise you should pursue to putting in those long hours to get it off the ground and become successful. There is a myriad of things to take into account, such as the amount of time you’re willing to put into the endeavor, the costs required to get started, and what level of support you can expect from the parent company involved.
These are just some of the many considerations that go into buying your first franchise. Let’s explore all of the basics that you need to know ahead of your purchase, so you’re not overwhelmed or blindsided by anything you were not expecting to deal with as you embark upon this exciting new journey.
Franchise or Not?
This is the first thing you must really mull over before you commit to any type of franchise purchase agreement. When you buy a franchise you’re also bound to comply with the strict instructions that come with operating a branch of that particular brand.
This may come with a whole list of limits and restrictions that may hinder your ability to make the business your own. You need to consider whether or not you are prepared to follow these explicit guidelines for operating your small business, otherwise you could lose the franchise entirely.
When you own a franchise, you are buying into a well-known brand the public has certain expectations of when they enter an establishment with that brand name on it. This leaves little to no room for personal expression, your store must look and act like all of the stores that are just like it. Are you ready for this level of compliance to conformity?
Like any small business, you are going to need to spend some money. How much money is something you must ascertain before you proceed. There is a wide variety of expenses that you will incur under the heading of startup costs, none higher than the initial investment needed to purchase the franchise license.
How much is that going to be? Well, it depends on the franchise you are planning to own and the industry in which it resides. Along with that upfront purchase you should expect to have the ongoing expense of royalty fees that you will need to pay on a routine basis, as well as the typical operating costs that come with any business. These include, but are not limited to, rent on the building your franchise occupies, insurance, payroll for your employees, accounting fees, legal costs, and the list goes on.
Are you prepared to spend this much money on your business? This is no small commitment of both time and money and you should only enter into an agreement with the knowledge that your financial situation could change drastically.
There are many reasons why an entrepreneur might turn to a franchise opportunity as their first foray into owning a business. It provides them with a built-in support system that comes with being part of a larger brand that is already well-established in the marketplace.
But each company is different, so you need to investigate just how much assistance and support the franchisor of your business is willing to put in. Most of them offer marketing and advertising assistance as well as technical support and staff training, especially if the franchise business offers a very particular service that requires it.
You may also want to determine how directly involved the franchise company gets with the operation of your business. Some of them are very hands-on, others assume you know what you are doing and leave you to do most of the heavy lifting. As a result, you need to consider your comfort level with either scenario.
Before you buy into any franchise, you need to think about how much time you can devote to running it. Are you planning on being on-site to ensure everything is going well or do you expect to hire others to do much of the day to day work? Remember, this is your franchise, the buck stops with you. Unless you have the resources for hiring a wide-ranging staff, you may be left to perform multiple duties all on your own just to ensure that the business is a successful enterprise.
If your flounder for too long or demonstrate an inability to operate the business up to their standards, the franchisor could rescind your ownership.