Step-by-Step Guide to Buying a Franchise
Step 1: Determine Your Suitability as a Franchisee
This first step helps you assess whether becoming a franchisee is right for you based on your skills, personality, personal wealth, goals, and other factors.
Can You Follow Rules and Procedures?
Just because a franchise has produced many successful franchisees doesn’t mean it’s the right opportunity for you. If you’re a highly creative person, a franchise environment will likely drive you crazy. Here’s why: Franchises are built on the concept that the success of a location depends on the franchisee following a well-defined set of rules. This ensures that the consumer has a uniform experience no matter which location they go to. Therefore, the product offerings, policies, and operations are going to be the same.
On the other hand, many entrepreneurs find it a relief that they don’t have to start from scratch and that they can take advantage of procedures and systems that have been proven to work. So if you enjoy following rules and want a future road map that’s clearly defined, franchising could be the right choice.
To help determine how comfortable you are with following rules and regulations, be sure to take a personality test, such as the Kolbe or DISC test. These tests can reveal personality traits that will help you rule out unsuitable opportunities and focus on those franchises that closely match your personal strengths. Or the tests may reveal that you’re not suited to franchising at all.
Are You Willing to Work Hard?
Successful franchisees must be willing to work hard. This isn’t a get-rich-quick scheme. Most franchisees are essentially “buying a job” with an average income range of $30,000 to $60,000 per year if 1) there is no debt; and 2) the franchisee is fully committed to the venture. For most franchisees, financial success comes only after years of patience and personal sacrifice. That said, franchising is also full of true success stories and those who stick with it can reap the benefits.
If you’re seeking to create significant wealth, you’ll probably need to become a multiunit owner. This requires a higher level of management skill, more capital, and a relationship with a franchise system that encourages its successful franchisees to own multiple units. For example, the big fast food franchises have many multiunit owners who are given first rights of ownership if a hot new potential location is found. Multiunit owners are usually given the choice to purchase any existing franchise that becomes available.
Do You Want to Manage Employees?
It’s important to get a clear understanding of the types of employees (if any) you’ll need to hire for your business. Are they highly skilled, and if so, how readily available is the talent pool in your business area? Next, examine your skills and background. How well-suited are you, by background, training, or temperament, to manage the type of labor force you’ll require? For example, if you’re a highly educated, white-collar professional, you may have difficulty overseeing a large staff of blue-collar workers.
Continue to Step 2: Understand Important Franchise Trends