The decision to buy a franchise is a big one – it’s an investment in yourself that will require your hard work and capital, but can also provide you with the independence and financial success you’ve always dreamed of.
But how do you choose the right business model? Is it wise to choose a low cost franchise and save on your early financial investment? How much will be required of you?
The answer depends on each individual and his or her particular situation, but there are certainly several factors to keep in mind when you’re interested in buying a franchise.
First, it’s very important to choose the right franchise for you. The business model you choose should reflect you and what you enjoy, since you’ll be managing and working within that model on a daily basis.
How to choose the right one? A cheap franchise sounds great, but first ask yourself, can I do this every day? If so, look around your geographic area – is there a market for this particular franchise? If you’re interested in a restaurant, and there are already several of the same type in your area, competition would be fierce and potentially problematic.
What about the company you choose to buy into? Make sure that growth is steady and demand is high. Buying a cheap franchise could backfire if the company isn’t well respected. Look into potential lawsuits and bankruptcies to see if the company is worth your investment.
Next, check out a franchise trade show. You’ll meet a lot of interesting people, and get the opportunity to learn more about franchise operations. Just keep in mind that these are usually serious events, so dress professionally and be ready to do business.
Once you’ve settled on a business model and company you like, take a look at your own financial capability. How much money could you offer on your own? How much could you borrow? If you’re not sure, you might want to speak with family and friends, or even visit the bank to determine your credit limit. Even a low cost franchise will require some form of investment, so be prepared for the costs. Knowing how much you can spend will make it easier for you to invest in a franchise without overextending yourself.
Next, get ready for the paperwork. If you choose to buy a franchise, you’ll be filling out a great many forms – but much like buying a home, these forms are designed to protect your interests, as well as the franchisor.
You will need to examine the FDD, or Franchise Disclosure Document. This is also a good time to interview the franchisor, and speak to the owners of existing franchises to understand the inner workings of the business model.
There will be a franchise agreement, financial statements, an earnings-claim statement, surveys of the trade area, and much more. Take your time and examine all of the paperwork. Investing in a franchise is about your financial future; it deserves the time and energy you put into reading the paperwork.
Once you’ve found a franchise that you like, and a company you can trust, you can gather your finances and prepare to sign on the dotted line. If you’re having second thoughts, now is the time to stop and think on it awhile.
If you’re worried that the decision making process will be complex and confusing, you’re not alone. For this reason you can always retain a lawyer for advice during the purchasing process. There are also many different books and magazines designed for those who want to purchase a franchise. By relying on these tools, you’ll be more likely to choose the company that’s best for you, and buy a franchise you’ll be proud of for years to come.