If you’re thinking of starting a business to supplement your income or gain independence from corporate America, investing in a franchise business may be a good opportunity for you.
The franchise industry is growing with almost 800,000 franchise locations and more than 4,000 franchise brands now operate in the U.S.
According to FranData:
- More than 365 new franchise companies in 2015.
- Franchising produces more than 3% of the GNP and outperforms all other sectors on job creation.
- Franchising is healthier than it has been since the economic downturn.
- The future of franchising might not be with mega brands with thousands of locations – a small, regional franchise chain might work well with just 50 or 100 locations.
It’s important to do a thorough evaluation of the opportunity before you make a decision to jump in.
First, set a goal for what you want to get out of your business. Are you looking to leave corporate America and do your own thing, or are you looking to run a side business? What sort of financial goals do you have for the business?
Second: Consider the pros and cons in light of your goals:
- The business model is likely already proven in other markets, so you can have more confidence in going this direction vs. starting your own business.
- You get to leverage a lot of the work that has already been done – such as brand recognition, business model, financial templates, etc.
- The Franchise management team is keen to help you with day-to-day operational guidelines, location scouting, retail store design & merchandising, etc (of course at the price of your franchise fee).
- Though you will be managing the business on your own, you have a network of other franchisees that you can mine to trade ideas & obtain mutually supportive relationships.
- You must ahere to the Franchisor’s requirements for the operation – and this includes operating hours, advertisements, service levels, menu items, etc.
- Franchise fees, Royalties, and Advertising Fees may be high and, in many cases, are considered additional fixed costs.
- Most importantly, understand the hours required as owner/manager and does the business plan deliver the ROI you seek.
10 Important questions to ask when considering Franchise business:
- Have you considered why a Franchise is the right business purchase?
- Would your involvement in the business be full or part time?
- Can you make financial commitments with cash flow franchise generates during initial start up phase?
- How will you finance the business? Do you have cash assets, plan a line of credit, use roll over 401K without penalty, apply for SBA loan?
- Are you an extrovert and enjoy connecting with people?
- What attracts you to owning your own business?
- What are your strengths and weaknesses relating to managing a business?
- How do you foresee your role on daily basis – do you see yourself as an owner manager (some franchisors require this).
- How would you rate the importance of status (what other people think) in the selection of a business?
- Types of franchise businesses that you know you would be interested in? Would not be interested in?
Set your goals on paper – be sure to include personal, time, financials, etc.
Here is a list of my personal goals as I set out to explore franchise ownership:
- Business ramp up quickly
- Increase college fund contributions
- Be my own boss
- Earn in excess of $100,000 in a year while working on my own clock
- To own and operate 3 centers within 10 years – one at beach location
- To have a business to hand down to my children
- To retire by age 62
Want more information on franchises? See the below resource links.
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