I get calls from prospective franchisees that say to me â€œJim, Iâ€™m interested in this franchise because I love the product. I think its greatâ€ I guess that is as good as any reason to investigate the franchise opportunity but not a good enough reason to invest even on Valentines day.
For franchising to be successful it needs to have a mutually beneficial relationship for all parties involved. This is much easier said than done. Just because they have a good product or service doesnâ€™t mean the franchise will succeed.
If the franchise is set-up in a way that favors one of the parties more than the other than the franchise system is setting itself up to languish or fail.
While there are many examples of successful franchises, buying a franchise business is no guarantee of success. Each year there are failures, both on the part of franchisors and franchisees.
Before you invest in a franchise, important questions need to be carefully and thoughtfully answered:
Are you willing and able to take on the responsibilities of managing your own business? You must be willing to work harder than you have perhaps ever worked before.
Will you enjoy the franchise? Determine your interests and types of business activities you might really enjoy.
Are you willing to completely follow the franchisorâ€™s system? People who are extremely entrepreneurial in the sense that they do not like to conform to a predetermined formula should be very careful about buying a franchise. If you have a tough time following direction than you will have a tough time as a franchisee.
Can you afford the franchise? One of the major causes of business failure is under capitalization. Remember, it is better to start out with more money than you think you will need rather than less. You also need backup to support yourself and your family while you build the business.
Have you carefully studied the legal documents? Franchisors are required to prepare a document called the Uniform Franchise Offering Circular (UFOC). This document will give you pertinent information about the franchise. It should be studied very carefully and discussed with your business advisors, lawyer and accountant.
Does the business model work? The business model has to deliver value to all parties involved. This is one of the key factors in a successful franchise system. If the business model delivers profits to the franchisor, franchisee and value to the consumer, a mutually advantageous relationship is created and a franchise system will grow and grow.
Does the franchise you are considering have a track record of success? You should get to know the principal directors of the company, their business background and how profitable their franchise has been.
Are the franchisees successful? It would be worth your time to contact a number of existing franchisees to discuss their experiences with the franchise. Spend time in the locations and get comfortable with the business.
Do you like the people with whom you will be working? One of the most important elements of a franchise is the ongoing support and contact you will have with the franchisor.
Do you have family support? Managing a franchise is a full time job. It requires great sacrifices of personal and family time.
Buying a franchise business is not a 100% guarantee of success. By carefully evaluating yourself and the franchise business you desire to purchase, the risks are minimized and the chances of success become greater.
[cross-posted at Let’s Talk Franchising