A franchise purchase can be an exciting time in the life of any business owner or entrepreneur. Franchises offer the opportunity to own and operate your own business with the help of a well-established business model and brand.
However, franchise packages can include important details that make or break your investment. It’s important to carefully review and understand the details before purchasing a franchise. Here are a few things you’ll want to consider as you evaluate a franchise purchase.
Examine Financial Trends
Most franchise owners go into business to earn a profit. It’s important to research the financial success or failure of other similar franchise locations before making your decision. You’ll want to request detailed financial data. You should spend time reviewing this information and determining if success is feasible for your franchise location.
Review Competition
As you consider a franchise purchase, you’ll want to closely evaluate the market for competitors. Your chances of success decrease dramatically if a competitor has already established a large customer base in the area. In addition to competition outside of your franchise, you’ll also want to inquire about territory exclusivity. If the same franchise can be placed in your area, your sales and resulting profitability may suffer.
Understand Operation Flexibility
Unfortunately, many franchises have very strict operational requirements. These strict guidelines can limit the creativity and innovation that most business owners know and crave. If you are interested in franchise ownership for the opportunity to shape your own business, be sure to check into these requirements and inquire about issues of flexibility and innovation within the franchise operational framework.
Consider Training Opportunities
One of the benefits of franchise ownership is the opportunity to use a proven model. However, any type of business ownership requires training. You’ll want to ask about training timelines and opportunities, and whether or not there will be ongoing support after the franchise launches. This is important as you embark on your journey of franchise ownership and will ensure both a seamless transition and ongoing success.
Review Hidden Fees
Hidden fees are a killer, and are a known part of almost any contract. The same is true with franchise ownership. Many franchise branches will include fees like royalty costs, training expenses, or marketing fees in the overall package. You’ll want to be very clear about all costs involved in the purchase, and you’ll want to closely review these costs, as they can quickly add up and impact your overall financial assessment.
Ask About Real Estate Assistance
Many franchise opportunities offer real estate selection and lease negotiation assistance. A good franchise understands that location contributes to a company’s overall success and wants to help new owners identify a solid location for the business. In addition to site selection, you might also inquire about assistance with lease negotiation. Many franchises will offer this as a package deal and this shows support and consideration for your ability to succeed.
These are just a few of the many ways you can evaluate a franchise before purchase. You should carefully review each part of this process, and hire a consultant to help with the review if necessary. Purchasing a franchise is a big decision, so be diligent and detailed in order to make the most informed decision possible.