Opening a new franchise can be tempting for an entrepreneur. Franchise-growth rates are keeping pace with the growing economy. In 2017, there was a 3.1% growth rate for franchise employment with a projected 3.7% growth rate for the following year. Some new business owners may think that it may be easier to own a franchise than to start a business from scratch, but there are seven questions you should ask before becoming a franchise owner.
There are ten distinct business areas that cover over 300 different franchise business lines in which to seek out a franchise: automotive, business services, commercial and residential services, lodging, personal services, quick service restaurants, real estate, retail food, retail products and services, and full-service restaurants.
CEO and President of MVF Expositions, Thomas Portesy, advises entrepreneurs of seven questions to ask before diving into opening a new franchise.
What is the Cost?
First, and most importantly, is to know the cost. Include items such as the purchase cost, inventory, and working capital. In addition, look at financing the initial costs and be sure to maximize the amount of capital afforded to you.
What is Your Passion and Talent?
Don’t forget that this will be what you spend your time doing. When owning a franchise, there is no need to be an expert sommelier if you can hire an expert for that job. A franchise owner must have the skill to find and manage the talent in order for the business to be successful.
Success depends on how well the business is managed, which includes hiring the best workers. At the end of the day though, as a franchise owner, the business should be something that you enjoy and are passionate about.
How Much Time Will Be Invested?
Don’t go into a franchise thinking that it will take less time than your current job. In fact, most franchise owners are willing to trade a 10-hour-a-day job they hate for a 16-hour-a-day franchise ownership they love. Just be sure when starting a franchise that there is enough time allotted to the franchise to ensure its success.
What Are the Franchisor Statistics?
Not all franchisors are alike. Make sure to check out the length of time the company has been in business, the average success rate, and the average time franchisees last.
What Can You Learn from Other Franchisees?
Try to find other franchisees and “pick their brains” for success points. Some questions to ask include:
- What were some challenges you overcame?
- Are there any key success factors you can share?
- Knowing what you know now, what would you have done differently when first starting out?
- How long before you started to see a profit?
Is There Franchisor Help Provided?
Find out the amount of overall support the franchisor will provide. If there are rough patches, how much help will the franchisor provide? Don’t be afraid to ask for help or support either.
What is the End Game?
Begin with the end in mind. Is this a franchise that you want to build up and leave to your children? Do you plan on selling it down the road? Going in with a plan for the end will help make decisions easier.