Top 10 Things to Consider When Buying a Franchise
Quite simply, a franchise is an existing business that sells the rights to use its business model and logo to an outside operator, referred to as the franchisee.
It has become an increasingly attractive option for entrepreneurs who want a profitable business of their own, without exposing themselves to many of the risks that come with building one from scratch.
Before making the leap, however, you’ll need to make sure you’ve considered the following:
- Assess your personal reasons for wanting to become a business owner. Do you want to break free of the 9 to 5 grind? Are you looking to increase your weekly income? Reclaim your independence? Your answers to these questions will be reflected in your final decision.
- Understand the lifestyle and income implications of owning and running a business. Flexible hours are a staple of business life. Particularly in the early stages, it’s likely that you’ll be doing some overtime while managing startup activities such as recruitment. If you choose a good franchise, however, a stable income should be relatively easy to achieve, as you’ll be operating under an already-proven business model.
- Don’t limit your options. At any one time, there are many franchises on offer. Examine as many as you can and try to narrow them down to a shortlist of the opportunities that interest you the most.
- Research the franchise’s structure and background. Examine the opportunity closely. Is it a business you think you’d enjoy? Does it have a good track record? What are the backgrounds of its top management? Does it have a good support system?
- Is the franchise selective? Do applicants have to pass through a rigorous screening process, or does the seller just seem eager to take your money? If the latter, be wary – it could be a scam.
- Consult an accountant, preferably one with franchise experience. Every franchise requires a certain amount of startup cash, and as with any new business, make sure you have adequate borrowing capacity and are clear on your repayment obligations versus projected income.
- Check upfront and running costs. Don’t forget that there will be ongoing costs over and above your initial franchise purchase. Make sure that they are disclosed.
- Check that your current or previous employer doesn’t have a non-compete clause. In other words, if you worked for a plumber, check this before you decide to buy into a plumbing franchise on the same turf.
- Run the franchise paperwork past your lawyer. Before you sign on the dotted line, check the fine print and make sure you have received and assessed all disclosure materials before you make a final commitment.
- Use the contract cooling off period to assess the paperwork and financial details. This is when you will make a final determination as to whether you want to proceed.
There is no argument that investing in a franchise is a major life decision. But with the right preparation, and the desire to succeed, it can be the ideal shortcut to owning a great business that generates significant profits and a strong sense of achievement.
“Chris Burgess is the CEO of Maiplus and has extensive experience in the courier services and business-to-business service market, having successfully franchised over 150 territories throughout Australia. Mailplus currently has franchises for sale in all major metropolitan areas.”
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