Buying a franchise can be a lower-risk way of starting a business, especially for a new entrepreneur. There are things you should look for and things you should avoid.
Look For:
- Track record. Make sure the franchise has a history of strong profitability.
- Positive experiences from other franchisees. Speak with other franchisees, and not just the ones referred by the franchisor. Speak with the top, middle and bottom franchisees.
- Growing opportunities. The franchise should be in a growing industry or niche and create an opportunity to add/expand your franchise.
- Support from the franchisor. This can include training and ongoing operations support.
- Trusted brand and name recognition.
Avoid:
- New franchises without a track record. How do you know it will be successful if it has only just begun? A new franchise with an unproven business idea creates too much risk.
- Low profitability. If most of the franchisees are barely making a profit, then avoid it.
- Franchise agreements that require you to take actions that may not benefit you, restrict your profitability, and use up your valuable time.
- High royalty and initial franchise fees versus the amount of support and benefits you receive from the royalty fees.
- A business that does not play into your strengths and your specific situation.
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