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6 Things to Consider Before Getting a Franchise
Are You Ready for a Franchise?
The world of franchising is getting bigger and bigger.
Franchising is becoming more and more popular as a way of going into a business. There are a lot of advantages, as well as disadvantages, in getting a franchise. With the difficulty of setting up one’s own business, a lot of people are turning to franchising because they think it is much easier to buy into a brand name and a business that are already up and running.
However, owning a franchise is not an easy task. Sure the products (or services) are already there. The name is already known. The system is already well documented and ready to put in place. All you need to do is register your own business, get a contract with the franchisor, pay the fee, put up your shop and you’re off and running.
Hmmmm, not so fast though. This is easier said than done. I mean, all things considered, are you really ready to get a franchise? Are you ready to become a franchisee? Or are you just wasting your time and you’re better off just starting your business from scratch?
What is a Franchise Model?
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Consider the following and find out if you are ready for a franchise:
Is it the right fit?
Do a self – assessment. Can you handle this business in the first place? Do you have the expertise or the know – how to run the franchised business? Do you have the time to run the business yourself? Do you have the passion for this type of business?
Some people become franchisees because they think they just have to have the money to pay the franchise fee, put up the business and run it. Sure, money is important (see next question), but without the passion, you don’t really have any initiative to see the business to its success and you might as well say goodbye to your money because it will surely go down the drain.
Do you have the money?
I did say money is important right? No matter how small or how inexpensive they claim the franchise fee to be, you still have to spend money to become a franchisee. Nice if you are rich in the first place and have money to spare, but if you’re not?
You can use your savings – probably the safest way for you because you will not pay any interest plus if the business fails, you’re not saddled with big loans that you cannot pay.
You can get a loan from the bank but then again, if you’re new in the business world, the bank will not give you the time of the day.
You can borrow money from your parents, relatives or friends, but you need to make sure that you agree on how the money will be paid and if there’s any interest attached to this loan.
So first is passion for the business and second is money. Now on to the third.
What are my options?
This means what are the concepts or the franchises that you need to consider. Create a short list of the concepts or franchises that you are definitely interested in or that you have a passion for (and of course, that fits your budget). Consider the pros and cons of each concept or franchise. Consider your strengths and weaknesses and if the concept will be the right fit for you. Compare, analyze, narrow it down and then select what kind of franchise you will go for. Now that you have narrowed down your options, get ready for the next consideration.
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Is the business profitable?
What is your ROI or the return on your investment? Will keeping your (hard – earned) money in a time deposit in a reputable bank make you earn more than what you will earn with the franchised business?
It is very important that you know what you’re getting yourself into and knowing how profitable (or non-profitable) the business is is certainly the first most critical step in this process. You can ask the franchisor what the usual ROI is in for this business. Make sure though you are clear on what level of investment or business activity or how many years before you reach this ROI. Or you can ask other franchisees what their experiences are, which brings me to my next point.
Is the franchisor (and the business itself) reliable?
Ask other franchisees what their experiences and their sentiments are about this franchised business. Do they trust the franchisor? Do they get ample support from the franchisor? Did the franchisor meet their expectations? Do they recommend the franchisor to you?
With the growing virtual world, some potential franchisee would even go online to check out the franchisor. They can even go to various forums to check if there are any comments, negative or otherwise about the business and the franchisor.
Of course, you need to meet with the franchisor personally, talk to him (or her) and make a personal assessment on how sincere or reliable (or the opposite of these) the franchisor is. Gut feeling may sometimes strongly lead you to conclude that this is (or is not) the franchise for you.
Can you cover your bases?
Can you read and understand the franchise agreement? Or better yet, do you have a lawyer who can help you out with this? The franchise agreement is a binding and very crucial contract for you and the franchisor. You have to read the agreement word for word and make sure you understand everything it contains, especially the fine prints. Don’t rely on your lawyers to protect you, you have to protect yourself.
If you can’t do this, better just start your own business independently and forget about franchising. If you can’t do any of the things in this list, you’re better off having your own business.
So are you ready for a franchise?