10 Questions to Ask Yourself When Buying a Franchise

Buying a franchise is an attractive option for someone who wants to run his/her own business.  It is half way between running your own business and working for someone else.  With a franchise you get support, help and direction and in return the expectation is that you’ll follow their methodology and make a profit.  You have the same profit and loss responsibility as a business owner and so if you lose money that money is your loss!  There is risk involved in buying a franchise so make sure you investigate it thoroughly first.  Here are 10 questions to ask yourself:

 

1.       How much money do I need to invest?  When you buy a franchise you are paying for the time and money the franchisor has spent in developing operating systems for the franchise, trademarks and logos for you to use, and a business name that is recognizable

2.       What kind of a business interests me?  Running a franchise requires commitment.  If you are passionate about what you are doing you will have the energy to do whatever is needed to make your franchise profitable and successful

3.       What experiences do I have that make me the perfect person to run this franchise?  Having prior experience in the industry you are choosing will be very helpful.  The more you know about the industry itself the better you will be able to judge if the franchisor has a well thought out plan.  There is a lot to learn about your new business. It is an advantage to begin with some industry knowledge.

4.       Will I be comfortable following the rules and regulations of the franchise?  Most franchisors impose standards on the franchise limiting the way you can operate the business.  This means that each franchise is uniform and customers know exactly what they can expect when they enter the franchise but it also means the franchisee cannot be creative or cater to local needs or issues.

5.       Will I resent having to pay a royalty to the franchisor each month and having to buy supplies from the franchisor’s designated supplier? You have to pay the royalty even in a slow month and sometimes the supplies cost more than you would pay elsewhere.

6.       Does the franchisor that I am considering give me an exclusive territory?  Some franchisors will sell other franchises in your area (maybe even across the street!) so that you have to compete against both your own brand as well as other brands.

7.       Have I spoken to some franchisees of the franchise I am considering?  Other franchisees might be willing to share their problems and successes with you.  Ask about the kind of support the franchisor gives. (You can get the other franchisees contact information from the FDD – see tip 9)

8.       Is there a demand for the goods and services this franchise offers?  As with every business you want to make sure there is a market for what you offer.  Do some market research on your own to determine the size of the market and who the ideal customer is for the product or service.  Do not assume that this work has already been done by the franchisor.

9.       Have I read the Franchise Disclosure Document (FDD) and the franchise agreement thoroughly and underlined areas where I have questions for a lawyer to look at?  These documents are important to you and your business.  It is important for you to understand what you are buying.

10.   Do I have an attorney who specializes in franchises to advise me on the franchise and the franchise agreement?  Once you are familiar with the FDD and the franchise agreement you can have an attorney explain the sections you do not understand. The attorney can also advise you as to what the problems might be in signing the franchise agreement.  Most franchisors will not change the agreement but an attorney who specializes in franchises will know what can be changed and how to approach the franchisor.

What’s an Encore career?

If you are in your 50s and have had  a  successful career but feel something is still  missing, you may be looking for an encore career.  An encore career is one where you are connected to a larger vision that gives new meaning to the work that you do.  If you have a longing for more fulfilling work, I can help you to find what you are looking for.  Using assessments to identify your strengths, values, and communication style you’ll find a career or volunteer situation that fits you perfectly and allows you to make a difference in the world.  For more information call me at 781-598-0388 or email me at asparker@asparker.com

 

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