If there’s a list of all-time most promising business opportunities, franchises would be on it. There’s a high success rate in such endeavors since there’s already a proven model. But of course, not all franchises are created equal.
As with other opportunities, you need to exercise good discernment before jumping right into it. If you’re planning to take this route, here are the things you should keep an eye on as you weigh opportunities.
Level of Investment
You’re essentially buying a business when you get into franchising, so you have to think of finances as part of your preparation. Some businesses demand an upfront fee and a percentage of your profits. Others, like restaurant franchise opportunities, will require a certain amount of capital during the first months.
You have to find that level of investment that you’re most comfortable in, as well as the inclusions in the costs required by the franchisor. It’s best to work with an accountant so you can weigh exactly how much you can afford.
Note also that there are lots of financing options in the market. You can borrow capital from banks. You can apply for small business loans. You can also ask the potential franchisor for their in-house funding programs.
The number one principle in business is always consider your customers. The market will reveal a great deal about the profitability and growth potential of the franchise. So, consider if the business you’re eyeing has a clearly defined market.
How do you do that exactly? Observe their messaging, marketing campaigns, and daily operations. If they know who exactly they’re catering to, the different aspects of the business would reflect their target audience’s demographics, pain points, interests, aspirations, etc.
Of course, it still pays to extend your research by asking the franchisor directly about consumer research or case studies they’ve done. A business that’s committed to improving their services would invest in these kinds of documents. The principle here is simple: consider the franchise’s target market by looking at their business efforts.
Brands that can replicate success in its franchisees have at least one thing in common: high-quality, comprehensive training program. In the franchisees’ perspective, you want the kind of support that would let you master the ins and outs of business operations, keep abreast with industry changes, and compete with your rivals strongly.
So, ask your parent company about the training curriculum, how they go about it, where they hold it, who attends. See the credentials of the facilitators. Are these seasoned entrepreneurs? Are they experts in your specific industry? Look into the training materials as well. Would there be documents apart from the operations manual? Ask the franchisor what kind of support they offer before you launch, during the launch and after you launch (at least the first months of operations).
Buying a franchise is a profitable venture, the perfect opportunity for new entrepreneurs. But just because it has a successful model doesn’t mean it’s immune to risks. You need to take opportunities before you with caution. Remember these things as you evaluate opportunities.