From making sure you're passionate about a brand to looking into financial returns, these are the things candidates should investigate before becoming a franchisee.
If this is your first franchise, don’t make the rookie mistakes so many have made in the past. Once you sign the franchise agreement you are locked into the business and it could be hard to turn back. Thankfully, franchising offers a proven model that has worked for countless aspiring business owners in the past. These are a few tips to keep in mind before officially signing your franchise agreement.
Make sure you really like the concept and the business.
Not only are you investing your money in the business; if you are going to be a successful franchisee you’ll also be investing your time. Make sure you really like what you’ll be spending most of your time doing. Being a fan of the business isn’t enough, you have to be ready to fully invest everything into the company.
Make sure you like the people you will be working with every day.
Similar to liking the business, you also have to like the people that you will be interacting with every day.
“Pay attention to the people you meet throughout the buying process and during discovery day to learn who you will be working with on day-to-day activities,” said Steve Beagelman, President & CEO or SMB Franchising Advisors. “Once you sign into the business nothing will change with the people you work with so be aware prior to signing the contact.”
Make sure there is a territory available in the area you want to live.
Many people are so eager to open a franchising that they are willing to relocate to any area that is available. While this dedication is great, similar to the above suggestions, this is a necessary thing to consider to ensure long-term happiness for you and your business.
Ensure the business will provide the financial return you desire.
You will be putting your all into the business so making sure that it will provide you with what you ultimately want is important.
“Be careful with this step,” Beagelman mentioned. “Many people jump to this step when considering buying a franchise. While this is important, if you are making a profit but don’t like the business, people or area you won’t be happy as a business owner.”
In order to get the financial return that you hope for, it is important to ensure that you have enough capital in the beginning. Many people coordinate the necessary capital to start the business bus neglect to acknowledge the need for additional funds.
“The easiest time to get capital is when you don’t need it so it’s important to think about this prior to signing the franchise agreement form,” said Sean Fitzgerald, Chief Development Strategist at No Limit Agency. “While Item 7 only requires three months of capital, in some cases it could take longer to break even as a business. Additionally, when you are starting out there are many extra costs that people don’t think about like marketing that can cut into your budget.”
Make sure everything is legally approved by a franchise specific lawyer.
While you might know a lawyer to talk with when you get a speeding ticket, it is important to speak with a lawyer that specializes in franchising to go over your franchise greement.
“In the long run, it will save you a lot of money and time”, mentioned Fitzgerald. “Regular lawyers who are not familiar with the agreement tend to try and challenge many aspects of the agreement that will rack up many legal fees and time.”
It is also important to review the transfer policy with a franchise specific lawyer in case you decided to leave the company.
“Agreements tend to be ten years and many people decided to sell the company before the ten years is over,” said Katie Fagen, FranNet Consultant. “It is important to fully understand from a legal perspective what your options are before getting into the business.”
Franchising provides a great opportunity for people to achieve their goal of being a business owner with a strong support system. If done right and thoroughly thought out, it can be a great business adventure. Once you sign the franchise agreement document it is hard to turn back so it is necessary to follow the tips from these professional franchise consultants to ensure your happiness and business profitability.