Franchise Company

Franchise Company

Is buying a franchise a good way to get into business, or isn’t it? On the whole, eying the general question, the answer is “yes”. It doesn’t matter what your ambition is, what your specialty is, or what market niche you want to break into; somebody, somewhere, has thought of it already and is offering a franchise license for it. But in particular, taking into account the type of person, the specific business, and the area, the answer changes to “It depends.”

Signs you might not be cut out for running a franchised business: you hate being told what to do. Being a franchise owner is just a few steps removed from being an employee. You still have strings attached, and have most of the decisions made for you, depending on how stringent or lenient the contact is. Another sign is: you expect something for nothing. Don’t think that all you have to do is set it up and then sit back and watch the money roll in. There is almost (but not quite) as much work in running a franchised business as there is in starting your own business.

Now, once you’ve established that you’re a good candidate for becoming a franchisee (and after all, you’re here reading this, so you must have thought this over already), the next question is when you’re looking at a company offering franchise opportunities. That’s the time to ask, “Is this company a good opportunity for me?”

Whoa, there, slow down! Now we’re talking about a very complicated decision. Here’s some key points you should look at:

(1) Is the company sound and stable? - You can leave taking crazy risks and off-the-wall ideas up to the start-up geniuses with the million-dollar bankrolls. What you want is an established company in a good market with name-brand recognition. Here’s a touch-stone to determining the viability of a company: have you been a customer yourself? For instance, fast food franchises are a solid bet. Who hasn’t eaten at McDonald’s? Who hasn’t at least heard of Starbucks?

Of course, you might not be able to afford the buy-in costs to the biggest-name franchises. Or perhaps that particular company is over-represented in your area and you’re looking to give them some competition. But generally, you should at least have heard of the company once in your life.

(2) Is it right for your area? - Don’t try to sell sand at the beach! Remember the simple laws of economics - supply and demand. If there are no types of that business in your area, it could be because there’s no market for it. It’s also a bad idea to be the only other competitor in an area where that type of business is already monopolized by another company. Sure, it would be great to be the only Pizza Hut in town, but if there’s a Domino’s on every corner, you’re going to have a hard time. Save fighting giants for the people with the resources to beat them.

(3) Is there a good return on investment? - No less an authority than Business Week says, “The most common hook in franchise fraud is earnings misrepresentation.” Yes, let’s talk about that. There are thousands upon thousands of established, reputable businesses who are not out to scam anyone, and then there’s the occasional flake. You should examine the claims made by the company, and independently investigate every single one of them. If it sounds too good to be true, it probably is. Search the Internet for “Federal Trade Commission” and the name of the company. And here again, apply test #1. If you’ve at least done business yourself with a company, you know that at least it’s possible for them to make money.

Last of all, it’s always a good time to ask, “Is this an industry that I would like to work in?” Obviously, if you are averse to the work, you probably won’t do well in that kind of business no matter how lucrative it is. Test yourself by going to an existing chain or outlet that does that kind of business and watch the staff for a while.

At the end of this list, picking a franchise business is a very personal decision. It’s all up to you.