For many people owning their own business is a lifelong dream. The goal of owning and operating a small business can offer someone the chance to pursue a passion and give them a chance to define their own professional destiny. Yet this dream can be very difficult for many people to achieve for a number of reasons, including the general lack of understanding of what is needed to operate and run a business and the inability to run a business on their own.
This is where the potential to become a franchise owner can become very appealing to some. The idea of having a turnkey business opportunity and potential support at one’s finger tips can seem like the perfect opportunity to dive forward into the depths of business ownership. However, navigating the waters of whether a franchise opportunity is right for you can be a unique challenge on its own.
Below are some common areas that people don’t spend enough time contemplating before making the decision to become a franchise owner.
Not understanding what your personal goals are with opening a business/franchise. This means you should understand what you are willing to put into a business opportunity and what you expect out of it. Having a franchise doesn’t necessarily mean you will work less or that the road to success will be shorter and easier. Spend time clarifying what your future financial needs are going to be, the amount of time you are willing to dedicate and put into a business and how much help you think you will need in order to operate it. Analyzing this information will only result in a better final decision.
Not clearly understanding your own skill sets. Many people confuse passion for skill set and this can create problems when looking at starting any business, franchised or not. What this means is that people tend to think because they love to do something like cook, they will have success if they buy into a restaurant or food-related franchise.
Make sure you understand what qualifications and skills you will need to operate and run the franchise and not just one function of the operations. Creating a checklist based on your skills versus what skills are needed to operate the franchise is a good way to begin your assessment. Also don’t let your passion for wanting to be a business owner mislead you into thinking that the business will be successful just because it’s a franchise. Franchises can offer support, but first you must understand what type of support you will need and whether or not the cost of the franchise is worth the support they will give you.
Being hasty. Just like any sales opportunity, some franchisors are looking to sell their product to you whether it’s the best fit for you or not. Don’t be hasty and think that the information the franchisor has given to you is accurate and complete. Do your due diligence and try to verify the information that has been shared with you. A few things that can help you in this process include 1). talking to current franchise owners and 2). sitting down with an accountant to review financial documents from the franchisor. At minimum be sure to request and review the franchisors disclosure document.
Slowing down the process can teach you key aspects about your industry that can help you make a decision of whether a franchise is even needed. Don’t feel rushed or pressured by the franchisor’s timeframe. You need time to make the right decisions.
Lastly, the above tips can help you make a more sound decision when considering any business opportunity, franchised or not. If you’re contemplating a franchise there is more information available online to help you along the process, but I want to end with this thought. Although buying a franchise may seem simpler, from both a financing standpoint and an operating standpoint, starting one is still a very risky proposition. According to figures released from by the SBA regarding their loan portfolio in 2011, there were at least 14 franchises that had failure rates above 70% in 2011. Needless to say for those who were involved in those franchises, franchising was not the right decision.