Franchise Checklist- What You NEED To Know Before Buying A Franchise
What you need to know before buying a franchise
Buying a franchise can seem like a daunting task but I certainly believe it is daunting if you do not know what you are undertaking.
Franchising is a known and proven business model that has been around for a very long time. It is one of the most common model when it comes to business ownership.
By understanding what you are undertaking it allows for the franchisee to be on the path to success.
To help you make an informed decision when it’s time to buy a franchise, we at Bailey Brown-The Franchise Agency have created a checklist. I hope this will help future franchise owners who are feeling uncertain or nervous about taking the risk to become an entrepreneur get some clarity.
- Franchise fees
If you are considering franchise ownership as a way of building wealth, you will need to be prepared to pay a franchise fee.
In exchange for a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual royalty fees or licensing fees in order to use the franchisor’s proprietary business knowledge, intellectual property, processes, and branding, allowing the franchisee to sell a product or service with the franchisor’s business name.
- Start-up Expenses
The start up expenses are the expenses that are essential to operate your business.
Every business will have certain start-up costs. In addition to the normal capital requirements to launch a business, a franchisee will need to have funds for ongoing royalty payments and business systems and enhancements.
Depending on the type of franchise you buy, other start up costs include construction, renovations, leasing, and inventory.
It must be noted that businesses do not automatically make a profit. So you should have the correct financial projections and analysis that makes the decision accurate.
A majority of people that come into owning a franchise need to use a loan in order to finance the business operations.
When starting a business you must realize there is a risk. The risk is that you can lose your money you put into the business.
In order to hedge against this risk, it makes sense to have other investors in the business that share the risk. Another reason why businesses fail is a lack of access to capital. So it makes sense to have a great relationship with the bank, and a great credit score that ensures your business will be well funded.
- Business Education
Education is key for success in business. Not only formal education such as education from a university, but also self education that allows you to learn on the fly and adapt to relevant information.
Depending on the franchise that you buy, you will need to educate yourself about the industry. Every industry have different profit margins.
You will also need to strengthen your business knowledge on how to operate a business and what success looks like in that business..
- Management Style
When you are considering buying a franchise you need to know your work or management style. For greatest satisfaction and effectiveness, you should seek a business environment that is consistent with your natural tendencies.
Work Style is particularly important for the business owner as they will set the pace and direction for employees, partners, vendors and clients.
Do you want a business in which you will be heavily involved in every aspect of the operations? Or do you prefer to develop employees, delegate duties and build an organization?
These are some of the questions that you will need to ask yourself.
- Franchise Business Path
There are many ways to success, for some it comes from climbing the corporate ladder for others it’s building a multi-unit franchise business.
Would you like to become a single unit franchisee, a multi unit owner or an area developer?
Operating a single unit is a great place to start your franchise journey. You can learn all you need to know about business ownership.
Becoming a multi unit owner or an area developer are the next step in your franchise journey if you would like to build an empire through franchising.
- Support of the network
One of the most challenging aspects of starting a business is being on your own. Although making all the decisions by yourself seems great to start, many new entrepreneurs can find it to be stressful.
There are some very important skills that a franchisee must have in order to be successful. Among the most important ones include people skills, communication and the ability to work in a team setting and get the best out of the team.
The number one reason small business owners fail is incompetent management. It is difficult for a single person to run all aspects of a business.
This is the main reason many professionals choose franchise ownership. When you buy, open and operate a franchise business you have the benefit of constant operational support from the franchisor.
Large scale franchisors have entire departments dedicated to helping their franchisees with operational needs. Franchisors also have a a vested interest in helping new franchise owners get off to a good start, because these franchisees are ambassadors of the the brand.
What would you add to the checklist? How have you decided to choose your franchise business? Let me know in the comments.