Franchising is a popular business model offering entrepreneurs a ready-made business formula, brand recognition, and support. But it is important to understand how to choose the right franchise for your business goals before making any financial commitments.
The key to success is finding a franchise that will suit your long-term goals and work style. The following steps will help you narrow your options and find a business that is a good fit for you.
Consider Your Lifestyle
Think of the process of choosing a franchise, like planning a trip to an exciting new destination. Whether looking to make more money or want a better work/life balance, hundreds of franchises can be better business opportunities to help you achieve your goals.
First, pinpoint your goals. Do you want to make more money, spend more time at home or take an entrepreneurial step in your career? Once you have your goals in place, the process becomes much easier. Reviewing franchise disclosure documents (FDDs) is a critical part of this process — paying special attention to item 19, which lays out the financial fortunes representation, can help you weed out companies that don’t meet your business goals. It is also important to research markets before you select a franchise.
Consider Your Personal and Entrepreneurial Goals
Before you choose a franchise, you need to determine your personal goals. Then you can build a business that aligns with your ambitions. It’s important to be honest when answering these questions. Are you looking for a chance to make more money or work closer to home?
Franchise opportunities exist in a variety of industries. They include everything from fast food restaurants to craft beer breweries, home remodeling brands, pet services, tutoring or college prep businesses, and even cleaning and janitorial services.
When planning to buy a franchise, consider talking to current business owners about their experiences. You can also ask about the initial fees, royalty fees, and the ownership model (owner/operator, semi-absentee, or absentee). This can help you narrow down your options.
Consider Your Skills
With franchising available in almost every industry, reflecting on your skills and the type of business you want to operate is important. For example, some franchises are more solitary, hands-on endeavors, while others require more management.
If you’re a natural at marketing and promoting, a franchise focusing on sales might be the right fit. Likewise, a customer service franchise might be the perfect match if you’re good with people.
Many franchisers seek applicants with specific industry experience, but basic business knowledge and an entrepreneurial drive are often enough to get started. If you are still determining what type of franchise best fits your goals and skills, consider attending a franchise exhibition in your area to learn more about different opportunities.
Consider Your Finances
Choosing the right franchise is also a financial decision. How much you have to invest will limit the types of franchises available to you, and it’s essential to understand your personal and business goals before determining what type of industry to conduct business in. Ideally, you should invest in a business with an established franchisor whose track record and financials can be analyzed.
It’s important to take the time to read all of the information in the franchise disclosure document (FDD), including Item 19, and to speak with existing and former franchisees. Also, it’s recommended to seek the advice of an accountant and a lawyer. These experts can help you evaluate the business plan and financial statements, calculate any earnings projections, and determine if they align with your investment resources and goals.
Consider Your Business Skills
Franchises can be a great option for entrepreneurs who want to work for themselves but also have the support of an established business model. It’s important to take the time to reflect on your personal and entrepreneurial goals when choosing a franchise that will help you achieve those goals.
It’s also important to consider your business skills. If you aren’t comfortable with bookkeeping, marketing, or other key business functions, consider working with a consultant or taking a course to strengthen those skills before investing in a franchise.
Franchises exist in nearly every industry, including tutoring, janitorial services, financial services, etc. Think carefully about your options and research each franchise you are considering thoroughly. Ultimately, you’ll find that a well-thought-out franchise purchase can bring you the best of both worlds: entrepreneurship and a proven business model.