Many sound franchise opportunities exist but while joining a particular network can mark the beginning of great things for one person, it can be problematic for another.
A growing number of people are keen to take charge of their future but are unwilling to risk all by starting a business from scratch. They believe that investing in a franchise is the safer option, and they are right. Franchisees operate under an established brand using a tried and tested business system. They also have access to extensive initial and ongoing support and a host of other benefits that are ordinarily available to branches of large companies. However, not all franchises are the same and not everyone will be happy as a franchisee. This article outlines the recommended evaluation process.
You need to keep in mind that starting a small business is hard work and requires a long-term commitment. Doing it under the umbrella of a franchise makes it easier because the “trial-and-error” factor is removed but the need for hard work remains. Unless you have passion for what you will be doing, day-in and day-out, for a very long time to come, these daily tasks will soon turn into a dreary routine. Customers and staff alike will sense your lack of enthusiasm and vote with their feet.
This important first step is far too often overlooked. Any business makes significant demands on its owners and a franchise is no exception. Ask yourself the following questions. Click here to take the Franchisee Self-Test
2. Do I have the entrepreneurial gene?
A franchise is a blueprint for the establishment and ongoing operation of a business. For good measure, the franchisor will throw in initial and ongoing support but responsibility for making the venture successful remains with you.
3. Can I accept the constraints a franchise imposes?
As a franchisee you own the business but you can not do as you please. The franchise agreement will impose limitations regarding corporate image, product range and the way you operate the business. This is necessary because replication of a proven formula is the backbone of franchising’s success. Individuals who like to do things their own way will not be happy as franchisees. As a member of the tam you need to be a team player and conform to strict guidelines.
4. Do I have sufficient capital?
Bank finance is available but seeking finance for the full amount is not viable. This will put undue pressure on the business’s cash flow at a time when the sales are just building up, and could lead to its demise. Franchised networks have an image to uphold. This means that the initial investment may be higher than if an entrepreneur starts out independently and takes shortcuts. (On the upside, looking the part instills trust in consumers and generally reduces the time it takes to reach the all-important break-even point.)
5. Am I willing to enter into a long-term commitment?
The typical franchise agreement runs for between 5-7 years, usually linked to an option to renew for a similar period, with good reason. It takes time to build a business, getting out too early simply does not make sense.