Wanna be the Next McDonalds? Everything You Need to Know About Buying a Franchise

what to know about buying a franchise business franchisee

Did you know there are roughly 800,000 franchise businesses in the US? 

If you're looking to open up a business, you might be interested in using the franchising model. Yet, if you don't know anyone that owns a franchised business, you may not know if franchising is the right approach. 

Keep reading, and you'll learn how the world of franchising works. If you want to open up a business, you'll soon learn how franchising can help you achieve your entrepreneurial dreams. 

Let's begin!


What's the Good Thing About Owning a Franchise?  

To begin with, we should probably discuss some of the benefits associated with owning a franchise business. 

One of the great things about franchising is that you can benefit from an existing brand that people already know and trust. 

For instance, if you open your own restaurant, you'll need to go through the effort of building brand equity.

After all, nobody will know who you are, and so you won't have a reputation. Following this, it might take many years before you have a recognizable brand that people will prefer over existing brands. 

However, if you open a McDonald's, you will instantly benefit from the McDonald's brand. As a result, it will be easier for you to attract customers and subsequently generate a profit. 

Another good thing about becoming a franchisee is that you generally have to deal with less risk. That's because the business models are tried and tested, and they've been shown to work around the world. 

Thus, if you become a franchisee, you just need to follow the company's plan, and you'll likely make money. This is especially the case if you buy into a big brand like McDonald's or Subway. 

When starting your own business, you probably don't have a tried and tested business model.

Therefore, you might need to go through a lot of trial and error before you find an approach that generates a decent profit. This can take a long time, and you might lose a lot of money during this process. 


What Are the Downsides of Becoming a Franchisee?   

Now that we've covered some of the benefits of franchising, we will now discuss some of the downsides. 

Perhaps the biggest downside associated with becoming a franchisee is that the initial costs can be very high. 

For instance, if you want to open a McDonald's, reports suggest that your initial investment could be as high as $2.2 million. That's a big chunk of change, and you might not ever be able to get to the point where you can save up that much money. 

Now, there is the option of financing, and you may be able to go down this route. 

However, financing a large sum of money can create a lot of stress in and of itself. That's because you will need to make your business work, or else you might not be able to pay the money back. 

Another bad thing about becoming a franchisee is that you're forced to do things in a certain way.

For instance, if you open up a McDonalds, you must follow their rules to the letter. If you deviate from their plan, you might get into trouble, which could result in you losing your business. 

When you become a franchisee, you also have to pay a royalty fee to the franchising company. If you're already dealing with thin margins, this can leave you with a small amount of profit.

As a result, you should try to estimate what your profit margins will be if you decided to do things on your own. If you do that, you'll be able to determine which approach will result in greater levels of profit.

You can then use this knowledge when you're trying to decide if franchising is the right option for you.


How to Find Franchising Opportunities

After reading through everything we've covered so far, you might feel as though franchising is a good way to go. If that's the case, you may want to learn how you can find good franchising opportunities. 

To start with, you should probably list some of the things you want from a franchising opportunity. So, you should ask yourself the following questions: 

  • Do you want to work in a particular industry?
  • Do you want to work in a specific location? 
  • How much are you willing to invest?
  • How many hours do you want to work per day? 

Once you've answered these questions, you can then go about finding franchising opportunities that'll be a good fit.

One way you can do this is by attending conferences dedicated to the franchising industry. If you go to such conferences, you'll find that each franchising company has a dedicated booth.

If you speak to the people at these booths, you'll learn everything you need to know about a given franchising opportunity. They will also give you some paperwork that you can study at home. 

During this process, you will probably come across a franchising opportunity that looks as though it'll be a good fit for you. But, before you commit to buying a franchise, you should speak to people that have already invested in the opportunity you're interested in. 

In doing so, you'll learn about the reality of being a franchisee for a particular company. This is information you won't discover inside the glossy promo materials handed out by a franchising company. 


Will Franchising Work for You? 

It's vital that you conduct plenty of research before you open a franchise business. That's because franchising isn't for everyone, and you'll only know if it's right for you once you realize how the franchising industry works. 

Conducting all this research isn't going to be fun, and you may just want to assume that franchising will work out for the best. However, if you want to avoid any bad decisions, you have no other option but to learn everything you can about the world of franchising. 

Did you like reading this blog post on buying a franchise business? Visit the Startups section of our Bootstrap Business Blog to learn more about franchisee success and running other businesses.

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