What You Need to Know to Open a Franchise
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Recently, I was sitting, drinking an iced latte macchiato at a well-known chain, when my wife said to me, "We spend then much time in here that perchance nosotros should think of starting one ourselves."
JUSTIN TALLIS | AFP | Getty Images Related: What You Need To Know Earlier Starting A Franchise Business
Which she promptly followed up with, "I've always wanted to run my own business, and allow's face up it: How hard can making lattes be? Everywhere nosotros go, [this chain is] opening a new franchise. And then, it's got to be an easier option than starting my ain business organisation correct?"
Well, non exactly.
My married woman is not the only one to call up the style she does, given that franchise-growth rates in 2016 again exceeded non-granchise business growth rates and continue to increase by 2.6 percentage per year. There'southward reason for this, specifically the 300 franchise business lines that already embrace 10 distinct business areas (automotive, business concern services, commercial and residential services, lodging, personal services, quick service restaurants, real estate, retail food, retail products and services and tabular array/full-service restaurants.
So, non only are in that location a lot of franchise categories and companies to choose among, but in that location are advantages to opening a franchise every bit opposed to starting your own business from scratch.
All the same, those choices and advantages don't mean a franchise is a guaranteed success. To become to that point, you however need to do your due diligence to increment your chances of making information technology work.
To better grasp the challenges of running a franchise, I met with Tom Portesy, CEO of MVF Expositions, which runs franchise expositions around the earth. I asked Portesy his thoughts on what a new entrepreneur should know earlier taking on this challenge.
Hither are the seven things he said to be aware of before y'all dive into that franchise opportunity.
1. How much volition it cost?
The get-go thing to know is the total investment to get your franchise up and running. This should include the purchase costs, your opening inventory and the amount of working uppercase you are going to need before you intermission fifty-fifty. Understanding these costs is crucial, equally you lot don't want to run out of coin when you are on the verge of success.
In addition, you also need to know how you lot are going to finance the business concern, every bit many people can really afford a bigger franchise opportunity than they recollect.
2. What are you good at, and what are you lot passionate virtually?
You don't have to honey coffee to open your own franchise coffee shop. Nor do yous have to exercise all the work.
Related: Why Opening A Franchise Business Is Meliorate Than Starting Your Own
When it comes to running that shop, y'all're actually the business concern owner and can hire people to deliver the service or sell the products; yous don't have to exercise all of that yourself. Sucess is dependent on how well y'all work on the business, not simply in the business.
Notwithstanding, non everyone is cut out to be a franchisee, to thrive within someone else's organisation. "Before buying a franchise," Portesy told me, "ane of the most important questions to ask yourself is, "Do I accept the correct personality to be a franchisee? People are all different, and then are franchises.
"As a outcome, ane of the worst mistakes yous can make is ownership a franchise when you are non suited to be a franchisee, or compatible with the business organization."
3. How much time do you lot demand to invest?
While starting a franchise is different from starting your own business, it is nonetheless a business, and you won't be the first person who's traded a x-hour-a-solar day job he (or she) hated for a 16-hr-a-day job he hates.
And so, make sure you understand what's involved. In that location are seasonal franchises that crave you to work especially hard at certain times of the twelvemonth; merely it'south still your business that you're going to exist running, and you need to be clear well-nigh how much fourth dimension you will demand to invest to make it a success.
4. What is the franchisor like?
Not all franchisors are the same, so you need to do your inquiry and get to know everything yous can virtually the franchisor. This includes things such as how long has this company been in concern, what is its average success rate and how long do franchisees stay on boilerplate.
But because a franchisor is new doesn't hateful it's not a peachy opportunity, just the more than you lot know, the better informed your determination can be.
v. What does it take to run a successful franchise?
When you do your due diligence, make certain that you lot speak to other franchisees and not merely the most successful ones. Ask them:
- What were the cardinal success factors they found?
- What were some of the challenges, and how'd they overcome and so?
- If they were starting today, knowing what they now know, what would they do differently?
- For those that failed, what were the factors that acquired that to happen, eastward.g. poor location, weak marketing, etc?
- How long did information technology take for them to first to make a profit?
It'due south bully to learn from your mistakes. It's even amend if you lot tin can learn from those of others so that you don't echo them.
6. What kind of assist does the franchisor provide?
When yous take on a franchise, unlike starting your ain business, you're not alone, and that can be a great comfort. Just make sure you lot know how much support you volition get from the franchisor, what other people'southward experiences were and how much aid the visitor offered those people when the going got tough. How much support did those other franchisees receive, or were they left to their own devices?
One of the hardest things is request for help when things are going wrong. But if yous know that the support will exist there and that the franchisor is willing to help, the procedure will be a little easier.
7. What's your end game?
I am a big fan of Stephen Covey's "second addiction" of highly successful people:Start with the finish in mind.
Related: Why You lot Should Buy a Franchise Instead of Starting Your Own
This applies to franchising. Before you lot accept up your franchise, know and sympathise what your exit strategy is going to exist. Are you planning to leave the franchise to your children, are you looking sell it or do you plan to just run it for a couple of years and then get out?
The improve you know and understand your end game, the easier time you'll have selecting the right kind of franchise opportunity, which fits you in the short term, and supports your long-term objectives.
Running a franchise can be a bully fashion to start running your own concern, but you demand to sympathise why y'all are getting into information technology, what you are getting into, whom yous're getting into information technology with and of class how you plan to get out of it. The amend you sympathise the answers to these questions, the meliorate your probability of selecting the franchise segment and visitor with the all-time potential for you.
Source: https://www.franchise500.com/article/305010
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