Buying and Running a Franchise Business: What You Need to Know
In these turbulent economic times, many people are looking for a new job, a fresh start, a second act. For many people, this arouses the desire to start a business. If you feel pulled to be your own boss, but are reluctant to start a new business from scratch, franchise ownership may have crossed your mind. By purchasing a franchise you are automatically tapped into a working system, with a recognizable brand. If you’ve had this idea, you’re not alone: franchise growth rates in the US now exceed rates of non-franchise business growth. Successful franchises can be found across ten industries: fast food restaurants, retail food, retail products, automotive sales, business services, real estate, commercial and residential services, lodging, and sit-down restaurants.
There are numerous benefits to the franchise game, it’s true. But that doesn’t mean it’s easy. Like any business, operating a profitable franchise takes the right kind of personality mixed a big heap of hard work. If you are considering taking the franchise plunge, ask yourself these questions.
Will I Make a Good Franchisee?
If you are looking for a get-rich-quick scheme, a franchise might not be for you. If you dislike dealing with the public, a franchise might not be for you. If you hate working nights, weekends, or holidays, a franchise might not be for you. If you have a fancy degree and need daily intellectual stimulation at work, a franchise might not be for you. If you don’t want to stay in one place, or just plain commit to one line of work, for a decade or more, a franchise might not be for you.
On the other hand, if you enjoy having a hand in every aspect of your business, you might make a great franchise owner. If you are not afraid of a little hard work, you might make a great franchise owner. If you are savvy and innovative, but also great at sticking to a plan and following directions, you might want to open a franchise.
How Much Will My Franchise Cost?
When you look into opening a franchise, your research will lead in the direction of a Uniform Franchise Offering Circular (UFOC). This comprehensive document should outline what it will cost to start your business and operate it for 1-2 years. If a particular company’s UFOC doesn’t provide enough info, ask them for more or choose a different company.
Beware, however, There are many additional costs that won’t be spelled out in a typical UFOC. Above and beyond the general operating costs of your franchise, be sure you have the resources to also cover things like rent, insurance, attorney fees, accountant fees, interest on any debts you incur, the cost of traveling to franchise training seminars and other required events, and employee benefits.
Here is the truth: running a business costs a lot of money, and franchises are really no exception.
How Much Time Will I Need to Devote?
Much like money, running a business takes time. When you are the person in charge of the whole circus, you are the person who needs to make sure everything gets done. In the beginning and during peak times, it would be no surprise for this to require 16-hour long work days. If you think you might dabble in food and hospitality, this means significant hours on nights, weekends, and holidays. Some seasonal franchises are only busy during specific times of the year, so if you’re looking for something with a little off time, you can look into that.
If you don’t have a handle on how much time your franchise is going to require, here is the bottom line: it is probably more than you think. Ask for more information from the company and talk to other franchise owners to try and determine the average amount of time you’ll need to commit.
How Strong is the Franchise?
With franchise ownership booming, more franchises are popping up. Before you wed yourself to the first franchise that comes along, evaluate the strength of the company. Some things to find out include: How long have they been in business? What is the average success rate for new franchises? How long do franchise owners usually stay in the business?
You should also determine how much support you can depend on from the company. Some franchises offer a great deal of support for marketing, training, and guidance. Others do not. Some franchisees prefer a little hand-holding to get the ball rolling on their new franchise, and others want a bit more freedom and privacy. Figure out where you land on this spectrum, and hammer how much support you can get from the company. Things might happen that you don’t expect. It is important to know where you can turn for advice.