10 Do’s and Don’ts When Buying a Franchise
By Pieter Scholtz – Master Franchisor of ActionCOACH
Investing in a franchise can be one of the most rewarding experiences for an entrepreneur, both on a personal and a professional level. Here are some tried and tested guidelines to assist you with your franchise purchase.
Do Something You Love
There are many measures for success, but those who do what they love tend to be good at it. This is regardless of whether or not they have a natural tendency or formal training. When we are inspired by our job or business, we will do whatever it takes to keep it and learn to do it better each day.
So when choosing a franchise, it’s important to keep in mind that our chances for success will be exponentially increased if we are able to do something that we love – and that also plays to our strengths and unique skill set.
Always buy where there is Proven Profit Potential
Nobody ever went broke while making a profit. The number one rule when shopping for a franchise is to assess the profits. When you find a franchise that produces profit, look down the road to see if there are ways to preserve that profit. Next, examine the potential for those profits to grow. Soon, the attractive and worthy franchises will emerge and the inferior and inflated ones will fall away until the shortlist becomes one.
Don’t Go it Alone
Enlisting the help of others is one of the keys to success in any endeavour. None of us got where we are without learning from others who could offer advice, insight, mentoring and wisdom. Asking for help can be a challenge for many people, especially those who share the rather independent spirit of the ambitious entrepreneur. But getting ahead in business means getting connected to others who can lend support. That is especially true when evaluating franchises to buy.
Develop a Business Plan
As the saying goes, “prior planning prevents problems”. A business plan offers a tangible, well-articulated blueprint of one’s overall vision, plus a breakdown of the steps and resources needed to accomplish both major and minor goals.
Don’t Buy Sight Unseen
Visit a franchise in the system to get a feel for how it operates both from the perspective of an investor and as a customer. Arrange to visit an older site, a brand new location plus one that represents the average store or office. Noticing the consistency or inconsistency across these different branches will offer a clear idea of whether or not the entire franchise delivers a unified brand identify and a constant level of customer service. Always ensure that you talk to current Franchisees to validate all the information that you have been given about the Franchise opportunity.
Do Get Everything in Writing
As with any major purchase, it is important to get everything in writing so there are no misunderstandings. Of course “getting everything in writing” means one thing to the average layperson and quite another thing to an attorney, so it is important to follow the guidance of a lawyer well versed in franchise agreements.
Anticipate the Resell Value
In the excitement of buying a business, it’s important to also look toward the future. As the Swedish proverb says, “the morning never knows what the afternoon has in store”. Even if the future of a franchise is bright, it still may be a good idea to consider selling it at a point in time. In fact, if the outlook for a franchise is outstanding, that may be the most compelling reason to put it on the market to convert the business into a profitable sale while demand is high.
Don’t Discount the Power of Dreams
Many people are afraid of going it alone because it represents the unknown. That’s understandable especially for those who have always worked for somebody else and have never shouldered the responsibility of self-employment. However, by following the kinds of steps outlined above, those fears – which are sometimes a valuable mechanism to protect us from errors in judgement – should be systematically alleviated. What remains is a vision of possibility. When the potential to fulfil a dream presents itself, it is important to recognise it, act on it and seize the day before the chance evaporates or somebody buys it out from under us.
Consult Family and Friends
Before signing on the dotted line, it is advisable to get the support of family members as running a franchise can have a direct effect on them. Owning a retail business, for example, can mean a commitment to work at times when the rest of the family is taking time away from work. Weekends and holidays are typically the most profitable days for stores and restaurants. Those who own and operate those businesses themselves may have to sacrifice time with their own families to make them prosper. Of course, the smartest business owners learn to set up their franchises so they operate smoothly even in their absence.
Listen to Instinct and Don’t Ignore Intuition
Just as it is important and healthy to consult family members before entering into the world of franchise ownership, it is also necessary to trust your own instincts and intuitions. If something doesn’t feel right then that may be a red flag or a signal that more investigation and research is necessary. If something is exciting and satisfying at gut level – that can be a strong indication of alignment psychologically and emotionally.
Having shopped carefully, applied due diligence to ferret out hidden pitfalls and potential bonuses, consulted the experts, and gained a personal insight into the business with key support from others, it is possible to invest with confidence.
Buying a franchise is an investment in an inspired future, job satisfaction and financial gain. Not everyone is cut out for franchise ownership, but for those who are, it can be a highly rewarding career move.