How to Evaluate a Franchise – 4 Key Points to Consider!
Most of us dream of one day owning our own successful business, making lots of money, and retiring in the sun. The problem is, entrepreneurship is a scary proposition, and striking out on your own is difficult, stressful, and unfortunately, you’re more likely to fail than succeed.
This is exactly where the franchise business comes in. For a fee, which varies by opportunity, anyone can buy a company with a proven brand, a proven marketing strategy, and a loyal customer base. From fast food chains to florists and many other businesses besides, there is a franchise to suit almost every taste. The problem is, with so many opportunities, how do you choose the one that’s right for you?
Here are the four key points we think you should consider before buying a franchise.
1. Cost
Yes, I know. Obvious. But it’s still the number one factor when choosing a franchise! Since franchise costs can range from a few hundred to millions, the first thing you need to do is identify what opportunities you can afford. There’s no use putting your heart into a franchise you can’t afford, right? Of course, financing is available for franchises, but in most cases you will still need to have some collateral of your own. So find out what your price range is before you start narrowing down the list!
2. Reputation
Now that you’ve figured out what you can afford, take a look at the companies you’re considering. Ideally, you’d like to look for a business that has a proven track record, spanning several years, and a loyal customer base. After all, you are buying a brand! Make sure the brand you choose gives you the return on investment you want.
Of course, there may be deals on new franchises that you can’t ignore, but remember, newer franchises will still be getting their teeth done and developing their market. If you are prepared for the long haul and are prepared to work, it could work for you.
3. Legality
Franchise businesses are governed by very specific laws in every country in the world. Make sure the franchise you’re buying has all its ducks in a row when it comes to legality issues, and if you’re a little worried about the contract, have a lawyer look over it with a fine-toothed comb.
4. Royalties
The royalties you pay on your billing will vary greatly from one franchise opportunity to the next. Make sure they are not so high that they cripple your business. Remember, you’ll need to cover costs, pay your royalties, and earn a living!
Talk to existing franchise owners, find out what their earnings look like, and do some research before you jump in. Remember: earnings are not the same as profit!
If you follow these basic steps to narrow down a long list of franchise possibilities, you should find that you’re left with some stellar options. Now, all that remains is to choose!