When you buy a new car or even a new cell phone, do you go straight for one model? Or do you shop around and look at different models first then make your decision? Investing in a franchise is trickier than buying a car or a cellphone. You have as many choices, but you’re investing quite a fair bit of money. So you need to choose the franchise that is right for you. Do you go for sports retail stores or sub shop franchises? Which industry is a good one to join?
Here are some basic questions to consider when you’re shopping around for a franchise business:
Why do you want to start a franchise?
People have different reasons for wanting to buy a franchise: as a hobby while they continue to work on their full-time jobs or as the primary source of their income. The reason behind your decision will affect what type of franchise you choose.
How much can you invest in a franchise?
A franchise doesn’t come cheap. If it doesn’t need a physical store or location, be ready to shell out $20,000-$200,000. One that needs a physical store needs at least $200,000. Be careful of franchises that promise less than $10,000 cash-out. When you factor in the franchise fee, equipment, salaries, inventory, working capital, and other monthly bills, you’ll know that $10,000 is never enough.
When you’ve reviewed your financials, you need to ask yourself if you’re willing to risk your funds on a business venture. Just because a franchise has a well-established brand, it doesn’t guarantee 100% success.
How much time can you invest in a franchise?
You need to be involved in the running of your business. If you have a full-time job on top of your business, you need to establish a schedule. If you want this to be the main source of your income, consider that if you don’t work, then you simply won’t get any money.
What are your skills?
What can you do? What do you like to do? What are you comfortable doing? Answering these questions will guide you on the industry you want to join. For example, if you love games then you can buy a video game rental franchise. If you love sandwiches, why not consider sub shop franchises?
When it comes to skill sets, do you like talking with customers upfront or are you more comfortable chatting with them online? You don’t necessarily have to be an expert in the industry you want to join. Franchising is a way to reinvent yourself and pursue your passion. But you need to use your top skills as leverage to make your business successful.
What is the local demand for the franchise?
Is the franchise you’re eyeing a fad that might change in a few months? Or is it an established brand? Is there a high demand for the product or service of the franchise, especially among the locals?
Again, you’ll be risking a lot of money in a franchise. You wouldn’t want to invest it in something that might not have a high demand after a month or two. By the time you get your permits, no one might like or buy your product/service anymore.
What is the competition like?
Since you’re already doing some research, learn how many competitors there are on the market. What is the demand for their products/services? If you haven’t narrowed down your search to several brands, then analyze the industry in general. How’s business, for example, in the food sector? Is there a particular type of food that has a stable customer demand?
When shopping around for a franchise, you need to know yourself—what you like, what your skills are, and what you want to do with a business venture. When you’ve done some soul-searching, you’ll have a clearer idea of which franchise is right for you. Then you’ll be able to create a shortlist of companies that you can approach to start your business venture.