Consider Franchising - But Watch Out!
By Charles Hopkins
Published 04/20/2006 | Entrepreneur
Having your own business is the American dream and, increasingly, international interest in owning a business has been building as well. There are many questions that must be answered before you consider owning a franchise or starting any business at all.
The first question to ask yourself is: "Do I really have the right mindset that is required to work for myself"? The reason this question is first is because without the attitude, drive, and ability to focus on long term goals, you will not be happy owning your own business whether it be a franchise or anything else.
This is not a "get rid of the boss" and live happily ever after situation. It will require many hours hard work, much dedication, always tough decisions and, most likely, many times where you must put the business first over your own needs.
If you do not have the stomach or the drive to do this, then continue getting a regular paycheck and forget a business of your own. You will find your customers to be much more demanding than any boss could ever be! Along with this introspection, is the question: "How have I worked own my own in previous situations?" Is this a new or untried product or service, do I enjoy the experience of working for myself, can I survive pressure and can I actually keep myself going when tough decisions have to be made? These are all questions that must be answered before attempting any franchise business.
The second question to ask yourself is: "Have I researched the market or field regarding the area I plan to purchase a franchise"? This must be very extensive as you want to have a good mix of the business fit being right or correct for you and a market that will support your decision. In other words, you want to be able to enjoy your business and it must have a market that desires to purchase from your business as well. You will need to research the type of personality you have, what your likes and needs are, and if your fellow consumer feels the same way about a product or service franchise you may purchase. You want to give yourself the absolute best scenario to succeed in something that you will truly enjoy working and marketing or else just stay in the job you have at present and keep your security.
After you have researched your desires and needs and attitudes, the next step is to address your financing issues. What amount can you comfortably afford to put down on a franchise? What will the operating expenses be? Within this thought process there are many pitfalls. For instance, do not forget to allow for employee salary, benefits, replacement training, recruiting ads, possible temporary help, government regulations for employment, accounting fees, local licensing fees, permits, remodeling or leasing costs, and many more costs that will need to be addressed within a start-up package plan. Many times a franchise licensor will be able to help with several of these questions. However, please do allow their word to be considered as final. Go out and do research yourself and find out if the figures they present seem logical.
You will want to check the Internet for lists and types of franchise licensors that are willing to take on new franchisees. Check the business publications such as Inc. magazine, Franchise Today or Entrepreneur to see what franchises are up and coming or those that are solid and gaining ground. You want a franchise that is growing and not stagnant and also one that has no litigation in courts or other legal issues.
Once you have narrowed down the field you want to be in, what you will bring to the table in regards to your personality and goals, the type of financing that you have available, and have done some research on the market for your product or service, it is time to talk to the franchisor that grants the license.
The first thing to remember with a franchisor is that they are there to sell you a franchise. Even the best franchisor out there will attempt to market their product and downplay other franchises. What you want to realize here is that their goal and game is to have successful franchisees but that does not prevent them from possibly making a wrong fit with you. You are your best advocate. Keep your head and do not let their enthusiasm become overwhelming to you with thoughts of riches and independence. The nature of a franchise is to share a good branded name and to spread the advertising and marketing costs over all the franchisees. Therefore, you will have rules, regulations, and contributions that you will be required to make and you will have a headquarters to oversee your operation.
This may be good for some people and for others, it may just not sit right. This is where your personality evaluation comes in. Judge for yourself if what the franchisor is providing matches up in your mind with the control they operate over your business.
The best thing you can do for yourself after you have selected a franchisor, is to have a business attorney of your choice go over all the papers, suggest items that might need some changing to benefit you more, and general advice on whether this licensing agreement is standard in the industry. You want to avoid being locked into a franchise that offers their licensees little resources should a problem occur. You may also want to contact several other franchisees and ask how satisfied they are with the service they receive.
The conclusion is that franchising can be a wonderful method of jumping into being into business for yourself but not by yourself. The licensor can offer many resources it might be hard to afford by yourself. They are a good source of encouragement and hand-holding when you are starting out and things seem overwhelming. Other franchisees will probably be helpful as well if you are not in their immediate area. Being in business for yourself can be exhilarating and franchising can be your ticket if researched thoroughly and properly.