Once you’ve decided that you want to invest in a franchise instead of starting a business from scratch, your next decision involves choosing the right franchise. With hundreds of tried-and-tested franchise systems already existing within every industry imaginable, how can you choose which one to invest in?
Here are 4 steps to follow when shopping around for a franchise business:
Evaluate Your Goals, Finances and Commitment
Before anything else, list your business goals and figure out what you want to get out of a franchise. Ask yourself these questions:
-What kind of business do you want to operate?
-What are you trying to accomplish with a business? (Earn money on the side, turn it into a full-time income, etc.)
-How many work hours are willing to invest in the business?
-Do you prefer to work behind the scenes or directly communicating with customers?
-How much income do you need the franchise to generate?
-How much money can you afford to spend to market the business?
-Where do you want to operate the business?
-Are you in this for the long-haul, or just short-term profit?
Your answers could help you develop a clearer picture of the type of franchise most ideal to your needs, commitment, budget, and business goals.
Do Your Research
If you prefer to do research on your own, start with the IFA Franchise Opportunities Directory that lists over 1,000 franchise systems. This database has an advanced search function, making it quicker for you to find franchise businesses by various criteria, such as industry, total investment, startup cash, and more. If you don’t have time to sift through all that data and deal directly with each individual franchisor, you may choose to work with a franchise consultant who can help narrow down your choices and find the franchise business that is right for you.
Choose a Niche
Now that you’ve discovered franchise systems available in the current market, you should have an idea what kind of niche you’re most interested in. Are you checking out the food industry? Or do you prefer the automotive, children’s services, or another industry? To narrow down your options, make a list of the franchise businesses you’re interested in, then create a chart where you could compare these important factors:
- Is there a demand for the product or service in the intended site location of your would-be franchise?
- How is the franchise’s competition? It’s more than likely that popular franchises may have existing branches near the site you plan to operate.
- Identify industries that are resistant to recession.
Once you’ve filtered out unsuitable franchises from your list and narrowed it down to only suitable franchise options, it is time to perform some additional due diligence. Find information about the company, their track record, and success rates. Request a copy of their Franchisor Disclosure Document, which includes the franchise contract, names of current franchisees, and any legal issues the company has faced in the past. Set up a meeting with franchisors and ask these questions:
- What is the company’s track record? Learn all about their success rates.
- Ask if you could talk to an existing franchisee or two for additional information. What better way to determine if the franchise is worth buying than to talk to someone who is currently running one.
- What is included in the franchising fee? Does training, equipment, marketing supplies, or licensing rights require additional fees?
- What restrictions does the franchisor impose on franchisees? How much control will you have to operate the business?
Starting a franchise business can be very rewarding and the fulfillment of a lifelong dream. But if you make the wrong choice, the dream could turn into a nightmare. Follow the steps listed above to choose the right franchise, and put yourself on the fast track to success.