Top 5 Ways to Analyze a Franchise Opportunity, Part 1
Posted by Shannon Suetos on January 5, 2011 in Business Start Up Advice [ 4 Comments ]
If you’re thinking about buying a franchise business, then it’s important to first understand the rules of the franchise game. In this two-part article we’ll cover five of the more important elements of the franchising research process.
Being a successful franchisee takes a lot of hard work and perseverance. It also requires a strong set of skills and competences. However, despite best intentions, a lot of franchisees just aren’t able to convert their enthusiasm into successful franchise businesses. As such, it’s imperative that you give yourself the best head start possible, by ensuring that you’ve thoroughly researched the business environment before investing in a franchise venture.
This process of research will involve a lot of complex factors, particularly when it comes to the specific circumstances surrounding the business in question. The full gamut of considerations is therefore beyond the scope of this article, but hopefully the following top five ways of analyzing a franchise opportunity will go some way towards assisting in your journey.
1. Ask yourself – “is franchising right for me?”
Before you delve into the type of franchise opportunities available, you should first make sure you understand the concept of franchising itself. A franchise business comes with its own unique set of opportunities and challenges, so it’s important to understand the nature of the beast before you go any further.
It’s also a good idea to make sure that you have access to sufficient start-up capital. You need to be financially capable of covering the initial acquisition fee, the development costs, and funding the day to day operations while you wait for the business to turn a profit.
Consider your place in the business. Do you have the right sort of experience to be a successful franchise owner? Is your personality type conducive to the franchise culture? Do you think you will embrace the franchise guidelines, or see them as restrictions that are hampering your desires for entrepreneurial freedom?
Lastly, the world is awash with a huge variety of business models, and franchising is only one of them, so it’s important to also look at some of the other opportunities that you may not have considered.
2. Find some franchises.
If you still feel that franchising is right for you, then you’ll need to start looking into the specific franchise opportunities available. Browse through business broking and franchise directory websites, visit franchising trade shows and conferences, speak to franchise councils and associations, and also just think of the franchise businesses that you’ve encountered in your day to day life. Create a short list of the ones that have the most appeal to you.
Once you’ve got a shortlist then you need to think about whether you would like to start from fresh in an untapped territory, or whether you would like to explore the purchase of a resale franchise business. There are advantages and disadvantages to both options, including differences in purchase price, risk, and contractual restrictions or otherwise.
3. Have fun
First and foremost, you need to have fun in business. If you hate the idea of working in your franchise, and the only thing that’s motivating you is the money, then this should be a big red flag. Review your shortlist of potential franchise opportunities and identify the ones that you think will bring you the most happiness, discard any options that really turn you off, and list some of the pros and cons for each of the remaining candidates.
Also make sure to think about your time resources; if you already have a busy and immovable schedule then you probably shouldn’t be thinking about a 9-5 commitment.
Meet the franchisors in charge of the remaining franchises on your whittled down shortlist. Are there any immediate personality clashes? If so, then you should probably look elsewhere as a healthy working relationship will be instrumental to success. By the same token, don’t be wooed by a glittery sales pitch that lacks substance. It’s not a personality contest; when you’re meeting the franchisor remember that you’re effectively interviewing them for a business position.
Steve Davis is a franchising enthusiast and member of the Housework Heroes cleaning franchise team.http://www.oracle.com/us/solutions/social/overview/index.html