Franchising can be an exciting opportunity for people looking to start a small business. They offer many of the same benefits as other small businesses, while providing significantly more support. While they can be attractive to those with an entrepreneurial spirit, they require a special set of considerations. To help you make the right decision, we’ve created a list of things to consider when evaluating a franchisor.
Are you passionate about the opportunity?
There are tons of different franchising opportunities available to you. Opportunities include restaurants, gyms, childcare, tax offices and a long list of other options. It’s important you pick an industry you are passionate about. Do you believe in the product or service? You’re going to be investing a significant amount of time, money and effort into this opportunity so it should be something you enjoy doing.
What are the costs?
There are a few different costs to consider. First, is upfront costs. How much will it cost you to get started? This can range from $10,000 to a few million dollars. The initial fees are important as they lay the foundation for your finances. The startup costs typically include some sort of initial fee, purchasing of equipment and capital costs. It’s critical to think about your budget, how long it would take to pay off a loan and how much money you’ll need to break even.
You’ll also want to consider the ongoing costs. Many franchisors have ongoing costs such as software licenses, advertising fees, equipment maintenance, utilities, rent and facilities. We recommend having a solid understanding of the yearly costs associated with operating the franchise so you don’t run into any surprises.
How much do you control?
Some franchisors offer more flexibility than others. This will be your business to run, but it’s up to you how much outside control you want. Franchisors may control location, marketing, prices, products offered and standards of operations. When evaluating a potential franchisor, you should evaluate how much they’ll allow you to control. If you’re looking to make more decisions, you may want to partner with a franchisor that is more flexible.
The market
When we talk about the market, we want to consider the physical location as well as the industry. Is it more of a niche opportunity? Is it stable? Or is it in growth mode? You will want to avoid an oversaturated market that isn’t likely to grow much more.
Support offered
One of the benefits of franchising instead of starting your own business from scratch is the support offered. When researching franchisors, pay close attention to the support services included. What kind of training do they offer? How much marketing support will you receive? Are there development opportunities? What happens when you run into IT or system issues?
Reach out to current franchisees
There is no better resource to help answer your questions than current franchisees. Many franchisors will provide a list of current franchisees. Set up a call to get a better sense of the opportunity and if it is something you want to pursue. They’ll be able to answer many of your questions and give you insight into the company and what it’s like to be franchisee.
We also recommend meeting with a business-banker to answer any financial questions you have may about franchising. They can provide information about financial support including loans and business banking accounts. Choosing a franchisor is an exciting decision. It’s a great opportunity for you to start your own business. As with any big career decision, weighing the pros and cons will ensure you make the right decision for you.