How to Choose the Right Franchise?
Have you ever given a thought about owning a franchise? If you are a small business owner looking towards expanding your business, franchising can be a good choice. If you are a new entrepreneur and want to start a new business, then too, franchising is a good option. In fact, owning a franchise can give you a better chance to succeed, than starting a business from nothing. This resource will act as a guide to inform you all that you need to know about how to choose the right franchise.
Each franchise has different types of investment requirements. Thus, choosing the right franchise can be a challenge as it involves more than just time, money, or the market. You need to choose the right franchise that suits you in approach and also in your personality. For instance, if you take the franchise of a fast-food chain, operating it is vastly different than running a pre-school for children. Not picking the right franchise can harm your pocket and hence it is extremely important to choose the right one. There are certain factors that you can consider for picking the right franchise for your business so that the chances of success are higher.
What is Your Expectation from a Franchise?
Before jumping on the bandwagon for a franchise, you need to ask yourself what your expectations are from it. What do you plan to achieve by investing in the right franchise business? Once you are certain about your aspirations for the business, it will become much easier to find the right kind of franchise where you can invest.
What Is the Amount that You Need to Invest in a Franchise Business?
The kind of opportunities available to you would mostly depend on how much money you have for investing. You need to work out a budget and be practical about it. A franchise will take a certain time to turn profitable and you have to hold on to your patience till that time. You must have enough money to hold on till the time your franchise business turns profitable. If you do not have that amount, you can talk to a franchise lender who can help you with starting the business.
What Is Your Risk-taking Ability?
Every person has a different risk-taking ability, commonly known as risk-appetite. You need to decide how much risk appetite you have. This will help you in narrowing down the opportunities you have for the right franchise. Most franchises look for a hands-on owner who will take care of the day-to-day business. You need to figure out how many working hours you are willing to put in behind your business. If you are not open to working on weekends, it will drop the retail and service franchises that require open business hours during weekends.
Do You Have a Strategy for The Exit?
Not many franchise owners pay enough importance to this factor of having a proper exit strategy. Most franchise agreements state a period of 5 years terms with two renewals. Some big-name franchises offer 20 to 25 years period agreements. What are your plans? Do you intend to build and continue with your business over several years? There are often certain restrictions when it comes to selling off the franchise. Thus, when you have the answer to this question, you can narrow down the right franchise even further.
What Is Your Strength?
Are you aware of your strength and weakness? You need to have a clear understanding of your strength, experience, skills, and also your ability to handle risk to find the right franchise. You should also be at ease with customer interaction and be able to manage employees. When all these factors are your forte, you can think about choosing a franchise business and be successful in it.
The Various Types of Franchises That You Can Choose From
As mentioned earlier, there are a variety of franchises and all of them have different requirements. Here is a quick look at the different types that you can consider for starting your business:
Investment franchises are for those people who are looking for capital gains and are willing to take a considerable amount of risk. Usually, these franchises involve expensive investments but can also be least hands-on. One such franchise can be the restaurants and hotels and other fast-food chains.
With a distribution franchise, you can use the trademark of a well-known business and sell its products. Such a franchise business includes soft drink manufacturing, home appliances, and farm equipment.
If you already have a business, investing in a conversion franchise can be a good idea. You can get the visibility and reputation of a well-known business and popularizing it in targeted locations.
Owning a service franchise means you have to offer a variety of services to customers by using the company’s name. You will need a team of employees and need to be involved hands-on with the business.
Franchise of Business Format
As a business franchise owner, you get to purchase the complete operating system of the business. The operations will provide you with all the elements including the physical store, supplies, and equipment. Some examples of such a franchise include business services, fitness centres, and so on.
The Cost Involved in Owning a Franchise
Franchise investment can vary greatly depending on the industry. While some franchise owners ask for an upfront fee of $10000, some might ask for $1 million. Some franchises look for industry experience from their prospective investors. Many of them suffice with the basic business knowledge and a hunger for the entrepreneurial drive.
Investing in the right franchise is a wise business move. It cuts down on the business foundational work like investing and popularizing a brand, developing a business plan, among other things.
Your franchiser has already taken care of the initial hard work and you will be able to take over from there to start and run a successful business.