Perhaps your 9 to 5 has lost its luster, or you’re simply searching for a way to supplement, or even replace, your current income. Starting your business can be a great way to achieve financial independence, but it takes hard work, dedication, and often, a bit of luck. But with the failure rate of small businesses estimated to be around 50 percent, according to the Small Business Association, it’s important to set yourself up for success from the beginning. This means you will have to do your research well. For instance, learning about the competition in coworking space if you are thinking of opening a coworking space business.
One option for starting your own business is franchising. When you franchise, you essentially become a part of an already existing and successful business model. This means that you have the advantage of proven systems, support from the franchisor, and in some cases, access to customers that the franchisor has already established. But while there are many benefits to franchising, it’s important to understand that it’s not a get-rich-quick scheme. You’ll still need to put in the hard work to make your franchise a success. If you’re thinking about franchising, here are 10 factors to consider.
1. Track Record
Nothing beats a proven track record. When you’re considering a franchise, take a look at how long the company has been in business and how it has performed over time. A company that’s been around for 20 years is likely to be more stable than one that’s only been around for a few years. And while every business has ups and downs, you want to make sure that the franchise you choose is on an upswing.
2. Financial Stability
A key factor to consider when choosing a franchise is the financial stability of the franchisor. After all, you’re going to be investing your hard-earned money into this venture, so you want to make sure that the franchisor is in a strong financial position. Take a look at the franchisor’s balance sheet and income statement to get a sense of its financial health.
When you franchise, you’re not in it alone. The franchisor should provide you with support in the form of training, marketing, and ongoing operational assistance. Ask potential franchisors about the type of support they offer and how often they provide it. You want to make sure that you have the resources you need to succeed.
In addition to support, you’ll also need training from the franchisor on how to run the business. The level of training required will vary depending on your experience and the franchise model, but it’s important to make sure that you’re comfortable with the training program before you commit to a franchise.
5. Brand Recognition
When you franchise, you’re tapping into the power of a brand that’s already established in the marketplace. This can be a big advantage when it comes to marketing and attracting customers. Make sure that the franchise you choose has a strong brand that will resonate with your target market.
When you buy a franchise, you’re typically granted exclusive rights to operate in a specific territory. It’s important to make sure that the territory is large enough to support your business but not so large that you’ll be spread too thin. You should also make sure that the franchisor doesn’t have too many other franchises in close proximity, which could increase competition.
7. Franchise Fees
Franchise fees can vary widely, so it’s important to understand all of the fees associated with the franchise you’re considering. In addition to the initial franchise fee, you’ll also be responsible for ongoing royalties and marketing fees. Make sure you have a clear understanding of all of the fees before you make a decision.
Royalties are ongoing payments that you’ll make to the franchisor as a percentage of your sales. These fees can range from 5 percent to 10 percent of your sales, so it’s important to factor them into your overall costs. In addition, some franchisors require that you reinvest a portion of your royalties back into marketing, which can further increase your costs.
In many cases, you’ll need to finance your franchise purchase. Make sure you understand all of the financing options available to you and compare the costs. You should also make sure that the franchisor has a good relationship with its lenders in case you need additional financing down the road.
10. Exit Strategy
Last but not least, you need to have an exit strategy in place before you buy a franchise. Things change, and you may eventually decide that you want to sell your business. Make sure you understand the franchisor’s restrictions on selling your business and factor them into your decision.
These are just a few of the many factors you should consider before buying a franchise. Doing your homework upfront will help you choose a franchise that’s right for you and set you up for success.