Franchise Buying – How to Get It Right the First Time
Some people believe investing in a franchise provides a better chance at success than sstarting a business froms scratch. However, it still comes with a lot of risks.
The good news is that you can learn from the mistakes of many who have gone before you and take steps to ensure that you are in the best possible position for success when you do finally make your franchise investment. Read on for our top tips for franchise buying – so you can get it right the first time.
Choose a Necessary Business
Your chances for success increase when you choose to invest in a product or service that people need versus what people want. When you invest in a necessary franchise, you will never be without customers.
Choose a Proven Business
Never make any investment without first looking at all your options. Learn which franchises in your field of interest have the highest success rate. Ask yourself:
- Does the franchise provide you with training manuals, employee handbooks?
- What financing options are available?
- What is corporate’s focus? Do they help in promoting their brand and product?
Proven business franchises often have multiple locations, each with a high success rate. If you choose a business that already has a successful track record, your odds of success when you invest are much higher. Avoid investing in a brand-new franchise that hasn’t had time to prove its staying power.
Talk to People Who Have Been There
Contact franchisees who have already invested in the business and ask them about their experiences. Find out if their investment has met their initial expectations. Ask them what type of resources and support they have received from the corporate offices and most importantly, would they invest again if given the opportunity to do it all over.
Check The Competition
Take a look at competitors in the same market. Their operations can comparatively tell you what you might expect from your chosen franchise. Entrepreneur suggests asking these questions:
“Who are the competitors in the businesses you are considering? How long have they been around? What are their competitive strengths and weaknesses? What is their pricing structure? What kind of locations do they have?”
Asking questions of competitors can give you a more comprehensive picture of the market and what you would be up against if you purchased a similar business in your community.
Consider Your Budget
It’s not enough to just put money into purchasing the franchise. You will need to make sure that you have ample funds for insurance, hiring employees, overhead business expenses for several months, and at least six months to one year of personal living expenses. It’s important that you give yourself a little room to move when purchasing a franchise because, like any other business venture, you are taking a risk.
Consult Other Professionals
Every franchise has a Financial Disclosure Document (FDD) and can provide it to you as an interested buyer. Consider hiring an attorney to read the document and identify any potential red flags you might have missed. It might also be a good idea to hire an accountant to check your finances before making your final choice.