A few tips for anyone considering buying a franchise in any sector
Franchising is a fantastic way for budding entrepreneurs to make the leap from punching the clock for someone else to working for themselves. But just because you’re buying into a brand and business model that’s already up and running doesn’t mean all of the hard work has already been done for you.
Launching a successful franchise demands equal parts research, determination and hard work, says JUSTJUNK President Mike Thorne, who has helped franchisees across the country clean up in the junk removal industry. “The single most important thing a prospective franchisee needs to consider when buying a franchise is the strength, depth and commitment level of the management team at the franchisor level,” Thorne says. “You’re investing in both a proven model and a support team to help drive the growth of your franchise.”
Here are a few tips for anyone considering buying a franchise in any sector:
1 Do your research
Speak with as many existing franchise owners as possible to get a solid understanding of each franchisee’s experience from start up through to the maturity of their franchise. Here’s the single most important question to ask: “Knowing what you know now, would you make the investment again if you did it all over again?”
If the majority of franchisees say yes, you know you are getting involved with a great franchise system.
2 Look for a proven track record
It is important to look for a franchise system with a proven track record of successful franchisees with little or no franchise closures. Entering into a brand new franchise system where the systems and model have not been fully developed adds a greater level of risk. Although there is more room to experiment and collaborate with the franchisor during the formative years of a franchise system, the risks are higher as the concept may not be fully proven.
3 Do your due diligence
It is critically important to find a great franchising lawyer who can review the Franchise Disclosure Document and help you determine if the franchisor will always act in good faith when resolving issues with franchisees. Be sure to avoid franchisors whose management team and legal representation are quick to fire legal letters across the table rather than discussing matters over lunch or coffee in an effort to resolve issues amicably.
4 Determine your investment threshold and stick to it
Take a deep look at your finances and know whether you can handle the start-up costs. It’s also essential to calculate your return on time and your return on your investment prior to buying your own franchise. Every individual has a different level of income they are seeking to achieve from their investment so don’t be afraid to ask existing franchisees about profitability along with the number of hours they invest each week to ensure the business is profitable.
5 Follow your passion
Running your own business takes hard work, long hours and relentless dedication, especially during the start-up phase. You need to love what you do so pick a franchise system that matches your talents and your passion.