With more than 14,000 restaurants across the United States, McDonald's is one of the most successful franchises in American history. If you're considering buying a franchise, it's a great way to start a successful business without having to do all of the legwork of building a brand. Owning a franchise is a challenge and an exciting adventure, but you need to make sure it's the right thing for you.
Here are four things that industry experts will ask you or have you consider before opening a franchise.
1. Do You Have What it Takes?
When you're considering buying your own franchise, you need to consider whether or not you're prepared to open one. Searching for the perfect franchise to buy means that you've already determined that you have the right skills, personality, and work ethic. If you're only looking at figures, your head isn't on straight.
There are different types of franchises. Some will be office-based while others will be retail-based. They don't all accommodate the standard 8-hour workday. Some require flexibility and commitment to ensure that you can keep the lights on from month to month.
You also need to look at your financial health. If you don't start with enough capital to make your down payment, you'll have to take out loans and go into debt. That provides a challenging start for beginning your business.
If you currently have six figures of capital to work with, you can start thinking about opening a franchise. If you only have around $100,000 and can't commit a full 40 hours of work every week, you might not be able to open a Burger King or a Gold's Gym. However, if you're looking for an office-based franchise, you could make that spare time stretch and you'd be able to save money without a storefront.
Finding the right business style for you will ensure that you can commit to the needs of building your franchise.
2. Think About Your Costs
If you're a franchisee, be aware that you'll have regular or large upfront payments that you'll have to pay to keep your brand. Franchisors are loaning you their very strong brand and a network of resources in order to start your own business. Instead of having to build a customer base from the ground up, you can have a base already primed and ready to work with you.
This won't be free.
The initial franchise fee is what you pay for the right to get things going. This might be a few thousand dollars or it might cost you six figures. The brand name and opportunities you'll get will correlate to how much it will cost you to get started.
In order to operate your franchise, you'll need to make further investments just to get the ball rolling. If you're franchising a fast food restaurant, you'll need to find some real estate and then start buying the equipment required to make the food. You'll have to invest in iniventory, uniforms, and even marketing materials before you open the doors.
There will be royalty fees later on based on how much you make per week or per month. As your brand runs ads, it will drive business in your store and you'll see the positive results.
3. Have You Researched the Market?
Every market has only so much that it can bear, for particular brands. If you live in a suburb, there might not be enough room for two branches of the same franchise to survive. If you haven't researched the needs in your market, you're already failing to make yourself relevant to your customers.
The company that is doing the franchising is going to want to attract potential franchisees, so they're going to let you open a franchise on the moon. They'll benefit from it either way. However, if you haven't found a market on the moon, you're going to lose money and end up shuttering fast.
With the help of some online resources, you can see what other businesses are around. If there's a glut of burger joints, try opening a chicken shack. If there are too many fast food restaurants and no place to work it off, you could hit a goldmine by starting a gym.
You have a right to ask for any documentation that your franchise might have on your market. They might already know the saturation and earning potential. Get as much research as you can and try to compare different locations if possible.
4. Have You Talked With Franchisees?
If the brand that you're looking to work with has a robust enough franchisee program, there should be plenty of franchises around. The most informative conversation that you could hope to have is with someone who has been through the wringer before.
Call a franchise owner in a noncompeting market and see what kind of advice they can offer you. Ask about how long they've owned a franchise and how long it took to meet their goals. Find out whether it's met their expectations, exceeded, or fallen short.
They can warn you of some of the more common mistakes to ensure you don't stumble in those important first years.
Get their advice on ways that you can cut costs and ensure you're always ahead in profits. Ask what they worry about in the coming years and how they plan to avoid pitfalls.
They're going to be a wellspring of information and should be happy to share it with another interested franchisee. If you're deciding between a chain or a franchise model, you could ask them or check out this post from Dealstruck.
Buying a Franchise is a Smart Fiscal Choice
When you're considering buying a franchise, you won't be worrying about whether or not your brand can withstand the test of time. You're investing because you know the power of your brand. What you'll be asking yourself is whether or not you can give your franchise what it needs to grow.
Because you'll need to be organized to get started on this adventure, check out our guide on how to do it.