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So you want to start a business. However, it involves a lot more effort than you sometimes expect. Coming up with an idea is one thing, but testing it out and finding an effective business model could be time-consuming and expensive.
Franchising has been an attractive alternative for many, especially those new to starting a business. It’s relatively easy to get into and has shown considerable resilience despite the COVID-19 pandemic.
However, starting a franchise business isn’t for everyone. Its unique characteristics make it the perfect business model for some people, while it might be constricting for others.
What Is a Franchise?
- 1 What Is a Franchise?
- 2 Questions to Ask Before Starting a Franchise
- 3 Be a Smart Franchisee
A franchise is a business arrangement wherein one party (the franchisee) pays a company (the franchisor) to use its business name, products, services, trademarks, and business model.
The franchisor provides training, marketing, and support to the franchisee, now operating under their name. In return, the franchisee needs to adhere to the franchise’s rules and pay annual royalty fees and the startup fee.
Questions to Ask Before Starting a Franchise
There are many franchise opportunities out there, offering attractive perks and gaining popularity. However, it’s essential to take some time to consider the pros and cons of starting a franchise.
Is it the right business for you? Here are five questions for you to answer before signing that franchise agreement.
1. Do I Align With the Franchise Brand?
As with all businesses, it’s good to sell a product or service you believe in. Getting a franchise means operating under a specific name, reputation, and way of doing business.
It’s crucial to work with a franchise you align with, ensuring a smoother experience for everyone involved. Disagreements are inevitable, but shared goals and values will keep everyone focused and on track.
If you work with a franchise brand you believe in, there will be less conflict and a greater sense of personal satisfaction when running your business.
2. Am I Prepared for the Responsibilities of Running a Business?
Purchasing a franchise might have saved you from the initial challenges of starting a business, but you can’t get away from actual management tasks once you begin operations.
Sure, the franchise might offer training and occasional assistance, but as the franchisee, you still need to work hard to ensure that your business is running smoothly. You might need to work longer hours, as managing a business is a full-time job.
You need to deal with employees and sometimes unruly customers, manage inventory, clean up messes, and promote your business in whatever way you can.
3. Can I Afford the Franchise?
To purchase and maintain a franchise, you need to make an initial payment to the franchisor. The startup costs can range from a few thousand dollars upwards to the millions, depending on the franchise type and its popularity.
You also need to pay annual royalty fees, since you are doing business under an established brand and business model. These payments are usually outlined in the franchise agreement, which you need to study thoroughly before signing.
Starting and maintaining a franchise business will have significant startup and maintenance costs. It’s important to consider these costs alongside your current financial situation before going through with the business.
4. Am I Okay With Having Limited Control?
Many people are happy to thrive under an existing business model. Others, however, prefer to make their own way and enjoy flexibility in their business dealings. If you resonate more with the latter, a franchise business might not be for you.
Doing business under a franchise involves letting go of total control, as the franchisor will make significant business decisions. This could mean offering a limited selection of products or marketing your business a certain way.
5. What Is the Franchise’s Track Record?
While you ensure your readiness for a franchise business, it’s also important to scrutinize the franchise you’re about to join. People usually go for a franchise to do business under a model that’s proven to work.
Before joining a franchise, do your due diligence and study the franchise’s track record. How long has it been in operation? Has it been successful? What do customers think about their products and services? Are the franchisees happy with their business?
Knowing these things will help you make strategic, informed decisions and save you time and resources in the long run.
Be a Smart Franchisee
Running a franchise business is no walk in the park. It’s important to consider all these factors before making such a decision. Once you find a franchise that fits your needs and capabilities, you can run a business that provides both profit and a sense of personal satisfaction.