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Make Sure You're Choosing the Right Franchise Opportunity

Taking control of our own employment status can be empowering. There are many people who are designed to help run a business rather than become a cog in one. Unfortunately, so many businesses that are started don’t succeed. There can be a variety of reasons of course. One way to increase the chances of success is to open up a franchise. 

A franchise allows you to take a well known brand in a field and open up a new location for their businesses. Restaurant chains are one well known type of franchising, but franchises exist in almost every business! Franchising will require an up front fee and then additional royalties paid monthly or yearly. Franchises can be restrictive in what they allow, so finding a franchise opportunity that matches the enthusiasm of the franchisee makes for a better relationship. 

The 7 Steps to Choosing The Right Franchise Opportunity

  1. Determine What You Want to Do
  2. Work Through Finances
  3. Research! 
  4. Reduce Your Options
  5. Interview Franchisors
  6. Design Your Exit Strategy
  7. Begin Your New Franchise

The 7 Great Steps Explained

The first step should be self explanatory. You need to determine what kind of franchise you want to take part of. This can actually be harder than you may think. Many people get into franchises for the financial benefit first. Some of the less glamorous jobs and franchises can make the most money as there is less competition! 

Financial situations are obviously going to play into what kind of franchise can be started. Business loans require solid action plans and aren’t as easy to get as many people make them out to be. Having a solid base to work from can make things much easier. Starting a franchise takes more funds to begin due to the initial franchise fee. 

The research phase is obviously crucial. Researching potential franchises that can do what you want to do is a good start. The most important part is doing market research on the market you want to enter. Is it already saturated in your area? Is someone already running franchises of the type you would wish to buy into in the same locations? Poor answers to these questions should reset a potential franchisee to step 1. 

Once your market research has determined that your idea can work, it’s time to reduce the number of franchise opportunities. There are legitimately thousands of potential franchisers. Break them down first by type of business (industrial, retail, home-based, etc…) and then to the specific concept you’re interested in. Make some logical decisions here. Choosing a business with lots of driving when you’re not comfortable with driving is obviously a poor choice. 

At this point you can interview the franchisors that have met your short list. Make sure you understand their rules and restrictions. Unexpected issues can result in additional unexpected costs. This can apply to goods and services, uniformity of the franchise operations (scheduling, bookkeeping, accounting) , etc. There are a lot of concerns. Before signing a franchise agreement, franchisors must provide a Franchise Disclosure Document (FDD). These documents are immense, but they should be thoroughly analyzed to know every requirement from the franchisor. 

Very few businesses ever design an exit strategy when they start. This is a common mistake. Owners may assume that their goal is to run the business forever. An exit strategy can allow for realistic expectations to be revealed. Some businesses need to have the plug pulled and an exit strategy can set up realistic loss expectations and timelines. If successful, exit strategies for selling the franchise (if that’s something that is interesting) should be prepared as well. Once that’s prepared and the franchise agreement is signed, it’s time to start running your franchise!

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