Many business owners thrive on starting their own business, but not every entrepreneur needs to start from scratch. That's where franchising comes in. Franchising can be a good opportunity for those who want to manage a business but don't want to come up with the business idea and build a company from the ground up.
The benefit of a franchise is that it's a business in a box, said Harriet Mills, CEO of Wine & Design. "Everything is done for you. You basically just have to train and market in your community." However, it's important to keep in mind that if the concept fails or the market turns, your business fails too, Mills added.
Someone who is involved in their community and willing to work hard and take a business to the next level is the type of person who makes a good franchisee, said Mills.
"Franchising is a great route for candidates that don't want to reinvent the wheel and want to follow a system," added Steve Jackson, CEO of pizza chain Hungry Howie's. "Someone [who] is a team player will work with a franchise system towards success."
If you think you fall into that category, you need to ask yourself some questions before taking the plunge and purchasing a franchise.
Editor's Note: Considering opening a franchise? If you're looking for information to help you choose the right one, use the questionnaire below to have our sister site provide you with information from a variety of vendors for free:
1. 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 conception to realization. Others would rather take someone else's idea and further develop it. If you fall into the latter category, franchising might be a good option for you.
"As a franchisee, you are in the business of growing a business," said Terry Powell, entrepreneur and visionary founder at The Entrepreneur's Source. "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."
2. Am I willing to follow rules?
Franchisees succeed when they adhere to the guidelines set in place by their parent companies, said Chris Conner, franchise consultant with Franchise Marketing Systems. 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, he said.
"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."
3. Do I have specific goals in mind?
Powell said that good franchisees have set goals, needs and expectations, and know how they can leverage the business as a vehicle to meet those aspirations.
"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.
4. Can I afford the financial risks?
Conner said new franchisees often make the mistake of believing that all the risk has been "franchised" out of the business, so they can'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."
5. 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 no matter what industry or type of business you're in, you 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 … business owner or an alternative-career coach, do not be afraid to ask for help."
Ask questions like the ones above before investing in a franchise. Self-evaluating yourself before purchasing a franchise can help you make a plan of action.
"Strategies are always essential for success," said Mills. "This ensures you always have something to work towards as a goal or exit plan for your everyday life."
These are some other questions you can ask yourself while you strategize:
- How much time will I be putting into my franchise?
- Do I need to hire a manager?
- How much money do I need to make the franchise successful?
- How long do I want to own this franchise?
For more insights on the current franchise market, visit this Business News Daily article.
Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article.