Franchises offer exclusive business opportunities to entrepreneurs who want to follow their dreams and make money at the same time. However, before starting a franchise, the owner should ask basic business questions before they invest any money or sign any contracts.
Entrepreneur magazine recommends that aspiring franchise owners take personal stock of their values, opinions and needs. For example, they should assess their business skills because franchises will need to have excellent retail, customer service, financial and accounting skills. Franchises provide structure and support, but the franchisee must be independent, self-motivated and work well without supervision. Franchise owners must also invest a majority of their personal time and life into the business. This means reduced hours with family and friends, yet long hours on weekends, evenings and even holidays. In addition to this, franchise owners must contractually commit to a long period of time, such as five or 10 years. Therefore, the franchise owner must have very clear and concise long-term goals and plans.
Starting a business in any industry can be financially risk. On the other hand, franchises are considered to be safer because they have a proven, successful business model. However, opening a franchise doesn’t guarantee success. Therefore, potential franchisees should analyze their risk tolerance and the history of the target franchisor company. For example, review the history of the franchisor, analyze their business decisions and interview other owners. In fact, talking to other franchise owners is the best way to truly gauge how comfortable you are with operating the target franchise. Be sure to perform a thorough financial audit of your budget, assets and liabilities. If necessary, consult with an accountant to verify if your predicted business model will be financially lucrative.
Read the Fine Print
Franchises are celebrated as simple and straightforward models for financial success. However, franchise contracts can be very long and very detailed. Over time, franchisors develop comprehensive contracts that cover every possible scenario and problem. In addition to this, there may be rigid requirements that may be difficult to comply with or work around. Therefore, talk to other franchise owners and ask them about their experiences with the contract. Consult a business attorney and prepare plenty of thorough questions for the franchisor about the contract details. Never invest or sign a contract without fully understand the implications and legal responsibilities.
To recap, buying a franchise is a great business opportunity, but careful research is required in order to avoid potential problems. Be sure to take a personal inventory of your goals and desires and financial inventory of your current and projected fiscal situation. Finally, be sure to carefully read the fine print in contracts and ask the right contractual questions.