Are you considering becoming a franchisee? Before diving into any franchise opportunity, it’s important to thoroughly evaluate the potential business and ensure it’s the right fit for you.
With so many options available, it can be overwhelming to know where to start. Here, we’ll break down valuable tips and guidance on how to evaluate a franchise opportunity.
From understanding the franchisor’s business model to assessing the financials, we’ll cover the key considerations that will help you make an informed decision and set you on the path toward franchise ownership success.
Related: Is Franchising Right For You? Ask Yourself These 9 Questions to Find Out.
Dig deep into the franchise
Going the franchise route is a great way to start your own business while leveraging an existing brand and proven systems. But beware: Not all franchises are created equal — so it’s imperative to research a franchise thoroughly before committing.
You can start your research journey by visiting the franchisor’s website and reading through their marketing materials to understand their products or services, history and mission.
You can also find industry publications or associations to learn more about the specific franchise’s industry as a whole, be it food service or health and wellness.
Outside of the franchisor’s website and social media, look for online reviews and customer feedback to gauge the reputation of the franchise in the marketplace. Does the franchise leave its customers satisfied? If not, why?
As you uncover more about the franchise, ask yourself if what you’re learning aligns with your values.
Don’t forget to dig deeper into the financials, too. Review the financial performance of the franchise by looking at any available financial disclosures, including initial investment costs, ongoing fees and potential earnings. This information can help you assess the profitability and if it’s a worthwhile investment.
Related: Busting Franchising Myths and Choosing the Right Opportunity
Create a list of questions for Discovery Day
By now, you’ve likely heard all about the benefits of Discovery Day. This is when a franchisor showcases its brand and provides more information to potential franchisees.
But how can you make the most of this valuable time?
Come prepared with a list of questions. Here are some examples:
- What sets this franchise apart from other similar businesses in the industry?
- Can you walk me through the training and support provided to franchisees?
- What marketing and advertising support is offered by the franchisor?
- Can you provide some examples of successful franchisees within the system and what they have done to achieve success?
- How is territory determined for franchisees, and what support is provided to help franchisees find the best location?
- Are there any restrictions on how I can run my franchise, and how much flexibility will I have in making decisions about my business?
- What is the average length of time it takes for a franchisee to become profitable?
- How does the franchisor handle conflicts or disagreements between franchisees and the corporate office?
Evaluate your fit within the franchise
Before moving forward, take the time to assess your skills, interests and experiences to determine whether the franchise is a good fit for you.
Consider your personality and management style and see if they align with the franchise’s culture, values and needs.
There’s no harm in walking away from an opportunity that doesn’t serve you. Considering buying a franchise requires a capital investment, so you want to be sure that your ideals line up with that of the franchise.
It also makes sense to evaluate your financial resources and budget to ensure you can meet the franchise’s initial investment, fees and other expenses. Some franchises are more costly than others, so if you have a budget in mind, make sure you stick to it.
Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.
You shouldn’t have to take this journey alone
Will you be left alone or will the franchisor set you up for success?
Ensure that the franchisor has a robust support system to help you get off the ground and continue to succeed with a variety of programs and marketing campaigns.
A supportive franchisor can be a significant factor in your success as a franchisee.
Don’t rush through the contract
The franchise agreement is a legal document that outlines the terms of the franchisor-franchisee relationship. It’s essential to review this document carefully and seek legal counsel to ensure you understand the terms fully.
Pay extra attention to the initial investment, ongoing and royalty fees and other restrictions on how you operate the business.
You should also review the franchisor’s policies regarding marketing and advertising, as well as any required product or service offerings. It’s a smart idea to review the franchise agreement with professional guidance, such as a lawyer.
Get ready to open your doors
Franchise ownership can be an excellent opportunity for those looking to start their own business. However, it’s crucial to thoroughly evaluate a franchise opportunity before investing your time and money.
By taking the time to assess these factors, you’ll be better equipped to make an informed decision and set yourself up for success as a franchisee. Remember that buying a franchise is a significant investment, so don’t rush the process and seek professional guidance when needed.
Related: Want to Become a Franchisee? Run Through This Checklist First.
This story originally appeared on Entrepreneur
