So you’re considering buying a franchise? That can be a sound financial investment, as the hard work of building a business is already done for you. After all, everyone loves McDonald’s sandwiches already, and they’ll be happy to buy them from your store! However, there are some things you should take into account before you buy a franchise.
What to do Before Buying a Franchise
Prerequisites
If you’re the kind of person who loves their independence and can’t stand being told what to do, you might not want to be a franchisee. Franchisees can make a lot of money, but they need to follow some pretty strict rules from corporate.
From hours to store policies to inventory, there’s simply a lot you won’t be in control of. If you don’t mind following orders and sticking to the program, you can excel in a franchise. However, if you want a lot of creative control, consider starting your own business, instead.
Research
Firstly, do your research. How do you think the would-be entrepreneurs who bought Quiznos franchises felt when they saw their parent company imploding? You don’t want to be in that scenario. Make sure the franchise you’re investing in is an already-successful business. If it isn’t, what business do you have trying to own your own a part of that?
Bookkeeping
Make sure you’ve got the kind of cash this investment needs. There’s a lot to consider: there’s the franchise fee, the cost of maintaining equipment, and the ad dollars that the franchisee has to pony up. Then there’s the issue of your profitability: even well-known brands can take time to catch on in a given location.
Let’s say you’re franchising out a McDonald’s. Awesome! But you’re in a new location, and people might not think to go to your store as part of their daily routine. It could take up to six months for your restaurant to really catch on, and during that time, you might not even be posting a profit. Make sure you’ve got the kind of capital to cover such an expense.
Consultants
Watch out for franchise consultants. Ask them about their pay, as many of them get as much as half of the franchise fee. Consultants are usually salespeople working on commission, so it’s in their best interest to sell you a franchise as quickly as possible. Don’t let these folks take you for a ride: go at your own pace with such a big move.