Franchises are popular and for good reason. They provide a safer alternative to starting a new business from scratch. There’s more support and an existing pool of customers to make money from.
However, as with any business or investment, it’s not 100% risk free. There are important considerations to make and questions to ask yourself before you take the leap into a franchise.
What are the real costs?
The cost of buying a franchise can vary widely, depending on the industry and the stage that the brand is at. You can start one for as little as a few thousand for a small brand. Not everyone has to open a new McDonald’s.
However, with these low costs it’s easy to jump in and get surprised by the costs that come afterwards.
Usually you have an upfront cost to get started but you will also have to invest in getting the business running. If you have a bricks and mortar business, there are plenty of costs associated with using a property, supplying furniture and equipment and the maintenance of it.
While the upfront cost will cover franchisee support, it won’t cover all the costs. Make sure you’re aware of this before you buy.
What is the support like for franchisees?
One of the best things about buying a franchise is the level of support and advice that comes with it. A franchise company can steer you through rough patches, provide you with tried and tested methods to ensure success and also take away the responsibility of maintaining the brand and marketing.
However, some lower cost franchises will not provide this. There may be support in getting you started but then you’re left on your own. This may be preferable to those who want more independence but having the support of a successful franchise can help lower risk and improve your chances at success.
Are other franchisees happy?
This might require a bit of research on your part. You need to know how the company treats its franchisees. Do they get support? Are they happy with the arrangement? The franchise company will say yes to these of course, so it’s definitely worth asking them independently.
Ask what to watch out for, if there are any hidden costs, whether you have freedom to make your own business choices or not.
How much control do you have?
Some people will be happy to let the franchise company take care of branding, marketing and other day to day rules or policies. Others like more of a say in how the business is run day-to-day. For example, if you want to start a new special offer – will you be allowed to do it?
On the other hand are there any nationwide offers you would rather not participate in? For example, when Subway launched its Valentine’s Day buy one get one free offer, all stores were expected to participate, but what if you didn’t want to? Do you have the freedom to say no?
Is a franchise right for me?
Franchises can be a great opportunity for some but stifling for others. Ask yourself what you want from a business? Are you happy to let the franchise company take charge or do you want to do things your own way? If the latter is true, perhaps a franchise isn’t really for you.
Are you considering a franchise? What are your top reasons for doing so? Let us know your thoughts.