No matter what type of business you want to start, the journey of entrepreneurship is fraught with risks and challenges. Striking out on your own to face those challenges can be intimidating, but if you become a franchisee, you'll have a built-in partner — the franchise parent company — to help you along the way.
"The support systems put in place by the franchisor make starting and running the business much simpler," said Terry Powell, founder and CEO of franchise-business coaching company The Entrepreneur's Source. "Everything is tested and proven to work, as opposed to an independent business, where the owner must navigate all available options without the resources that are available to a franchisee."
"Teamwork, branding, economies of scale and marketing mechanisms provide franchisees with a reduced risk of failure when starting a new business," added Chris Conner, president of Franchise Marketing Systems. "Franchise systems offer training, support and infrastructure that wouldn't be available to a new entrepreneur and should provide a shorter learning curve to becoming a business owner and building the business to profitability."
Whether it's a chain restaurant, a maid service or a fitness instruction program, franchising is an appealing option for many entrepreneurs. But is it the best choice for you? Powell and Conner advised asking yourself the following questions to determine if franchise ownership is the right path. [Franchises for Every Budget]
Do I want to grow a business, rather than build one from scratch? Some entrepreneurs want to bring their own unique ideas to life from the ground up. Others would rather take someone else's idea and grow it from its existing point. If you fall into the latter camp, franchising might be a good option for you.
"As a franchisee, you are in the business of growing a business," Powell told Business News Daily. "It may not be necessary to have past knowledge of the industry you're entering into, but it is necessary to follow the systems put in place and drive toward constant growth."
Am I willing to follow rules? Founders of brand new startups thrive on disrupting the status quo and breaking "the rules" of the industry to create something new. Franchisees, on the other hand, succeed when they adhere to the guidelines set in place by their parent companies. Conner noted that the ideal franchise candidate has the skill set to be an entrepreneur, but the makeup of a solid employee — someone who's willing to run a business according to the established system.
"Franchisees typically have good credit scores, pay their bills on time and were usually good students," Conner said. "They are comfortable with structure and rules."
Do I have specific goals in mind? Powell said that good franchisees have a set of goals, needs and expectations, and know how they can leverage the business as a vehicle to meet those aspirations. Without these concrete objectives, you're searching for a business model based on hope and emotions, which is not a sound way to judge a venture's feasibility, he said.
"It is not about having a love affair with the product or service. It is about what the business can do for you," Powell said.
Can I afford to take on some risk and initial financial loss? While established franchises certainly do minimize the many risks inherent to entrepreneurship, there's no such thing as a 100 percent guarantee. Conner said new franchisees often make the mistake of believing that all the risk has been "franchised" out of the business and they won't fail.
"Franchises provide security, optimal opportunity, mentorship and many benefits to franchisees. But in the end, it is still a business, which always comes with ... the potential for failure," he said. "Always take the worst-case examples into account."
Conner also noted that a new franchise will always lose money in its first several months, so it's important that you are financially stable enough to see yourself through the "lean" beginning period. He recommended having six months' worth of working capital (living expenses plus fixed-business-overhead costs) available to you, on top of the franchise fees, prior to becoming a franchisee.
Do I have a business mentor I can turn to? As a franchisee, you'll benefit from the training and support of your parent company. But any entrepreneur, no matter what industry or type of business he or she is in, should have a trusted mentor or coach to rely on for help and advice.
"A coach can be a great sounding board and help you see beyond your blind spots to challenge you to look at things from a different perspective," Powell said. "Whether consulting a fellow business owner or an alternative-career coach, do not be afraid to ask for help. Advice from those who have already gone through the process of opening a business ... is invaluable to those pursuing entrepreneurship through franchising."
Conner agreed, advising potential franchisees to research the market and speak with as many people as they can when making a decision to invest in a franchise.
"The business world is full of bad decisions and poorly planned business ideas," Conner said. "Franchising allows you to navigate this path more effectively and know what you are getting into."