When you are faced with the opportunity of investing in a franchise business it is important that you do all your homework. The old adage of “let the buyer beware” is applicable in this case.
A potential franchisee needs to take the following steps when investigating a franchise opportunity:
- Do a self-evaluation
- Research the franchisor and the concept
- Prepare a business plan and weigh up the feasibility
- Arm yourself with knowledge and expertise
Be sure to ask the right questions while you are evaluating the opportunity! These include:
- Is becoming a franchisee for me?
- Can I be a part of this business?
- Will I fit in as a franchisee?
- Am I …
– Able to comply with the franchise rules?
– A “go-getter?”
– People orientated?
– Looking for a long term investment?
– Prepared to work long hours?
– Willing to learn?
– Motivated by monetary reward?
– Passionate to make it work?
– Able to manage people?
– Financially sound?
It is imperative that you make sound choices when investing in a franchise. You must be very careful about how you select a franchise. It is usually advisable to choose a compatible industry. This being said it must be remember that a dancer is not always the best option to run a dance school. Other skills and characteristics required to successfully run the business must be taken into account – the most important being business acumen and financial management skills. Franchising is not to be considered a “get rich quick scheme” – more like a “get rich slowly scheme!” The investment will take time to make returns and you must be financially prepared for this. If you are over geared and have had to use too much borrowed finance at the outset – it is going to be difficult to provide for the essential and unforeseen. It is imperative that the business has a solid working capital base to ensure cash flow is sound. Sometimes it is better to keep it small and simple rather than stretching yourself beyond your financial capabilities. Furthermore it is vital that you consult legal advice, financial advice and discuss it with your family.