5 Questions To Ask Before Starting A Franchise Business

questions ask before starting franchise business becoming franchisee

There is a common misconception that franchise businesses are easy to launch and that they almost never fail. 

Yes, opening a franchise business can be simpler than launching a startup from scratch. You acquire the business model that already works and have full support from an established brand. 

Most franchisors already have an extensive customer base, numerous brand advocates, and a solid marketing strategy in place. Just look at brands like KFC, Subway, or McDonald’s

However, becoming a franchisee is more complex than just finding a popular franchise brand and buying into it. You need to choose the industry relevant to you and be fully prepared to launch, manage, and grow your business. 

So what type of franchise will you start? Will it be an in home healthcare franchise, a fitness center, or a restaurant? So, here are a few questions to ask yourself before you even consider starting a franchise business. 

1. Are You The Right Person For A Franchise Business? 

No matter if you are launching a business from scratch or taking up a franchise, being a business owner is stressful. So, before you even consider entering the entrepreneurial waters, you need to give yourself a nice personality test and ask yourself whether you have the personality to become a franchisee. Are you comfortable with hiring and firing people, negotiating with suppliers, managing your finances? What about making fast decisions and taking immediate steps to resolve problems? 

If you believe you will be a good franchise owner, then ask yourself what kind of franchise business you want to open. It is important to choose the niche you’re good at and choose the franchisee company that is compatible with your values and interests. 

Just like Stephen Covey taught us, you need to start with the end in mind. Do you want to run and grow your franchise business for years and then leave it as a legacy to your kids or you want to sell it fast? Understanding your short-term and long-term goals, you will be able to choose the franchise opportunity that fully supports your business idea. 

2. How Much Will It Cost? 

The costs of starting a franchise vary. Let’s take popular fast food franchises as an example. To open a Subway franchise, you need to pay $116,600- $263,150 for setting up the store, a royalty fee of 8% of your total gross sales, and a franchise fee of $15,000. The franchise cost for UPS Stores also varies. For traditional locations it is between $168,885 - $398,323, while for rural locations it is between $166,659 - $309,045. On the other hand, if this is a bit out of your budget and you are looking for an affordable franchise, you can open a Footprints floors unit for $75.000.

So, if you want to get your franchise up and running, you first need to consider all expenses, from the purchase costs and the operating costs to your net worth franchisors consider before accepting you. 

Also, you need to know how exactly you will finance your franchise business. There are many options to consider. Some franchisors will loan you the money to launch their franchise, so consider that when making decisions. Alternatively, you can always apply for a traditional bank loan or an SBA loan or even leverage crowdfunding. 

3. Is There Any Franchise Agreement You Should Sign? 

Like its mere name says, a franchise agreement is a contract provided by a franchisor. This formal document gives you legal rights to launch a franchise, as well as lists the rules and regulations you need to follow. 

A franchise agreement includes the information about payment provisions, the use of intellectual property, confidentiality, the use of supplies, the use of software, hiring processes (requirements related to employee qualifications, the number of employees, etc.). 

Signing this document is one of the most critical phases of starting a franchise, so consider consulting your lawyer to help you understand what’s expected of you. 

Keep in mind that this agreement is here to protect your rights, too. So, try to remember (or even better, note) what franchise representatives promise during your meetings and make sure that all these promises are outlined in the franchise agreement. If you notice any significant differences between their verbal promises and legal contracts, talk to them and request them to make the changes needed. 

4. Does A Franchisor Offer A Comprehensive Training Program? 

Choose a franchisor that understands you and provides you with an extensive training program and support. This is exactly what the majority of popular franchises like McDonald’s, KFC, The UPS Store, or Subway offer to their franchisees. Namely, these are all big brands that want their branches to provide exceptional user experiences and build a positive image around their brand. 

That’s why their programs are detailed and highly educational. They teach you everything, from how to market your store and manage employees to creating reports and negotiating with suppliers. Most importantly, not only do they help you get started, but also teach you how to scale your franchise business and expand it to multiple locations. 

Franchise training determines your success right from the start, so it should be one of your first considerations when choosing a franchisor. 

5. What Kind Of Support Does The Franchisor Provide? 

Running a franchise business has numerous advantages over starting a new company. One of the main benefits lies in the fact that you’re not alone. A strong, well-established brand has your back. However, not every brand takes their franchisees seriously enough. So, do your research to find out how much support you will actually get from the franchisor. It’s important to know that a franchisor is willing to provide you with the right support whenever you face a problem you cannot solve alone. 

Can they help you obtain and maintain your business equipment? Do they help out with marketing? Can they connect your with financial assistance? Find out how supportive the franchisors are.

Find Fantastic Franchises Fast

There are numerous benefits of becoming a franchisee and I’ve mentioned some of them. However, before you start looking for the right franchisor and building your business strategy, you first need to understand why you’re doing that, what you expect to get from your franchise business, what the characteristics of a good franchisor are, and what your long-term goals are. I hope that these 5 fantastic franchise tips will help you find success!

I hope you enjoyed this blog post about the major questions to ask yourself before starting a franchise business or investing in one.

Interested in more articles about starting a new business?

Read Related Resources:

How To Know When To Franchise Your Business

Case Study In Starting Two Successful New Businesses

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