Franchising a Business? Here are 5 Questions to Evaluate Your Readiness
Franchising is a method for expanding a business and marketing products through a licensing relationship. It is a form of business wherein the franchisor or owner of a product, service or method obtains distribution through affiliated dealers or franchisees.
While it sounds really promising, you also have to assess your readiness in franchising a business. It may seem simple, but there are other responsibilities that franchisors need to prepare for, which are not only limited to identifying the products and services that will be offered by the franchisees but also providing them with a comprehensive operating system and offering assistance in organizing, training, merchandising, marketing and managing.
The definition of franchising helps you determine whether you are qualified to operate as a franchise. But to help assess your readiness further, here are 5 questions to help evaluate yourself before franchising a business.
#1. Is Franchising for Me?
You have heard of and probably been inspired by millions of people who testify about gaining financial freedom from owning a franchise. But you also have to know that franchising is not for everyone and there are also millions of others who have tried and failed in their franchise venture.
Before you decide to become a franchise owner, self-reflection is warranted. Assess yourself to determine whether franchising is right for you. Consider that it is a regulated industry and it requires you to follow a strict operations guide. Franchising is for those who want freedom but with the guidance of a system and support. If rule-following doesn’t come easy for you, then it is likely that franchising is not for you.
#2. Am I Prepared to Take Risks?
Like every other business expansion model, investing in a franchise requires capital and investment. Upfront costs and royalty fees can be a serious load for a franchisee. When opening a franchise, the franchisee must not only settle fees for the location but must also pay for the dues required to operate. In addition, franchisees must also compensate royalty fees or the cost required to remain in the contract.
Most franchisees don’t provide financing and as a franchisee; you are on your own. Do not waste your time learning about franchise opportunities that may not even fit your budget. In other words, if you can’t handle the risk, don’t buy a franchise.
#3. Is this Franchise for Me?
Never franchise a business just because you heard it’s profitable. If you are looking to buy a franchise, learn as much as you can about the brand, its products and services. Even the location where you are looking to set up a shop needs to be predetermined because even a great product and a great location will not guarantee success of the business. Acquaint yourself with the pitfalls of being a franchisee before you sign up for the job.
#4. Is this Franchise Profitable?
An ideal franchise business provides initial training and ongoing support to establish your business for profit. Explore franchises that are credible and professionally reputable. An interview with other franchisees will give you insight into its profitability.
Here are some of the questions to ask other franchisees:
Are you making money with the franchise investment?
How long did it take you to break even?
How long before you started to make money?
#5. What’s In It for Me?
Franchising is a great opportunity to help you get started. It allows you to be in business for yourself but not by yourself. If you believe franchising is for you and you’ve found the right franchise, then it should mean that your decision fits into your personal and financial goals and you are seeing yourself successful five years from now. If that’s so, congratulations.
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