If You’re Thinking Of Buying A Franchise, This Is What Will Be Required Of You
Are you thinking of taking charge of your future by owning or running a franchise business? If the answer is yes, then you need to understand what is required of you before you commit to joining a franchise.
Ask yourself the following 7 questions to find out what is required of you to buy a franchise.
IMPORTANT NOTE: Every franchise opportunity has its own requirements but these are the basic and general requirements. You will need to investigate the franchises that you are interested in to find out what their exact requirements are.
Do you fit the franchisee profile?
Franchising requires a very particular mindset, attitude, personality, and skillset to be successful. Typically, the franchisee profile will include the following behaviour and skills:
- strong-willed and social with communication skills,
- prepared to take risks,
- hardworking and willing to do whatever it takes to get the job done,
- attention to detail,
- organisational skills,
- persistent, determined and committed,
- natural sales skills,
- leadership ability and
- the ability to learn, follow instructions, rules, and regulations.
Will you be an owner-operator?
Franchisees are responsible for the management and running order of the day-to-day operations of the franchise. A franchisor generally/typically prefers having owner-operators as franchisees who have a passion and desire for being hands-on and actively involved in the franchise, fulltime. Franchisors prefer not to have a manager run the franchise as they don’t have skin in the game and won’t take as much pride in the franchise as the franchisee. Most franchisors would outright refuse a manager to run the franchise and only accept an owner-operator. Owner-operators have more control over the franchise and can action decisions immediately. Franchisors may be reluctant in awarding a franchise to a person who does not plan to meet this requirement.
Are you willing to enter into a long-term commitment?
Building a successful franchise takes time, it will not happen overnight and will require you to be persistent and determined to become profitable and sustainable in the long-term. A typical franchise agreement runs for 5 years and is linked to the option to renew, so you need to make sure you are ready for the commitment and open to building a strong relationship with the franchisor, their brand and support team.
Do you have access to sufficient capital?
In the majority of instances, the franchisor requires you to contribute 50% of the total capital investment in cash (out of your own pocket or savings) and the remainder may be financed through various options such as bank loans, alternative lenders and funding institutions, retrenchment packages, soft loans from relatives, taking on an investor or business partner, crowdfunding and stokvels. The franchisor might initiate creditworthiness checks on you, so make sure you have a good credit record. The franchisor should be able to guide you in this process.
Do you need to have industry or business experience?
Understanding the industry and having some business experience will be beneficial and make you a more viable franchisee candidate. Some franchises do specify a required amount of experience and knowledge in terms of the industry, your education level, business, and management track record but some don’t. The franchisor will provide you with training on how to run and manage the business successfully. When choosing your franchise, we would advise that you are realistic about your skills and what you are passionate about. If you are venturing into a new or different industry than you are used to or have experience in, research the industry as best you can..
When applying for a franchise you need to have an area in mind, ideally, this should be close to where you live. You will need to determine if the franchisor has opportunities available in your immediate or surrounding area that you can apply for or if they are willing to create an opportunity in your suggested area based on factors such as demographics, foot traffic and viability. If the franchisor does not have opportunities in your area yet and they are not planning to expand there just yet, be patient, they will add you to the database and reach out to you as soon as opportunities are available.
Do you need to have a site or premises to buy a franchise?
The franchisor will assist you with site selection and lease negotiations of a viable site. You do not secure a site before you are approved as a franchisee. If you have a site in mind, the franchisor will investigate the potential of the area and site for consideration and approval.