Franchise businesses are engines that keep the U.S. economy churning. For several years now, the franchise sector has outpaced the overall economy, and that strong growth is expected to continue, according to the annual economic outlook of the International Franchise Association.
It’s no wonder that prospective business owners look at the franchise sector as a place where they can grow and prosper.
There is plenty of room for new owners, but you’ve got to know what’s right for you. So, here are six questions that can help you on your journey.
Am I Ready, Personally?
Franchise ownership has many benefits, but ownership is ownership. As the boss, you will have to hire and fire employees. You will have to make daily business decisions. You may even have to sweep the floors and clean the toilets at your business.
You may have the passion and energy for business ownership, but you also need to be ready to do the “not so exciting” things that can go along with being the boss.
Even if you think you can manage those tasks, you’ll need backup. That’s why it is a good idea to talk with family and friends to see if they are ready for you to take this step and committed to helping when you need them.
Finally, evaluate personality traits. Are you OK with taking direction at work? Can you follow a system? If your answer is “no,” you may not be an ideal candidate for franchise ownership. If, however, you want to work with an established brand and benefit from being part of the system and the rules that go along with it, the franchise opportunity may be ideal for you.
Am I Ready, Financially?
It would be easy to compare your bank account and assets and to the estimated initial investment for a franchise and say to yourself, “I can afford this.” However, there’s more to ownership than the initial investment. The day-to-day operation of the business requires working capital, for example. Good franchisors will help you understand how much you may need to successfully operate your business beyond the initial investment and may be able to suggest or provide financing options.
Running the business is only half the equation, though. You’re also going to need money to run your life. You may have a mortgage or a car payment or other monthly bills that will not miraculously vanish once you become a business owner. Work with a financial advisor to determine how much you will need personally to ensure that you still can live the life you enjoy while your business is getting established.
Based on your available capital, you may want to look at a franchise that starts with a low initial investment and has low overhead and operating costs. You may also want to consider an opportunity that will allow you to “keep their day job” for a while. Seasonal franchise opportunities present the perfect opportunity. Because they do not fully function year-round you may be able to maintain a full-time job while also owning a franchise.
Is it Worth the Investment?
Think about the franchise opportunity and ask yourself if there is demand for the product or service the franchisor offers. Is the industry reliable with the opportunity for repeat business?
With a positive answer to those questions, you can narrow your search for a franchise. Once you find one that might work best for you, you can talk with current and former franchisees about their experiences. Ask them questions like:
- How much did it cost to get your business open?
- Were your first-year sales what you expected?
- When did you break even?
Use the information they provide as a guide to help you know whether this will be a good investment for you. You can also check the Franchise Disclosure Document. It will provide information about lawsuits, financial performance and more.
Does the Franchisor Have a Good Business Model?
One way to answer that question is to investigate how long the franchisor has been in business. Businesses that have longevity must be doing something right. They typically have leadership that demonstrates expertise in the field and is always looking for ways to improve. However, just because a business has staying power doesn’t mean it’s the perfect opportunity for you. Find a business model that is easy for you to follow and designed to help you succeed.
Does the Franchisor Provide Support and Expertise?
Good franchisors know that happy, successful franchisees are the key to success. They provide ongoing training and support and are accessible when franchisees have questions or concerns. One way to determine if a franchisor provides such support is to attend a franchise seminar where you can ask questions of franchise management and employees. Look at the franchise website and see what types of training opportunities are available. You can also reach out to current and former franchisees and ask them to share their experiences.
Are There Opportunities for Growth and Expansion?
Look around the franchise. If you find that many of the franchisees are multi-unit owners, your question may be answered. Talk with the franchisor about opportunities for growth. What type of help will the franchisor offer if you choose to expand? Look closely at franchisor’s financial assets and resources to help determine if the franchisor has the financial ability to support additional franchisees.
Your answers to these questions can help you determine whether the franchise opportunity a good one for you. Franchises offer a perfect vehicle for those who want to be their own boss, and the franchise ownership experience can be rewarding. For more information about franchise ownership, read the white paper, Saying “I Do” to a Franchise.
Martha O’Gorman is one of the founders of Liberty Tax Service, serving as Vice President of Marketing and Chief Marketing Officer since the company began in 1997. She is responsible for developing brand awareness in every major market in the United States and Canada. She has created marketing and sales strategies for both franchise development and consumer programs that have led to Liberty’s rapid growth and development.