Selecting a Franchise - Purchasing a franchise is like any other investment: it comes with risk. When you think about a particular franchise, think about the demand for the products or services it offers, competitors that offer similar products or services, the franchisor’s background, and the level of support you will receive.
The Demand - Is there a demand for the franchisor’s products or services in your community? Is it seasonal or ever- green? Could you be dealing with a fad? Does the product or service generate repeat business?
Competition - What’s the level of competition nationally, regionally, and locally? How many franchised and company-owned outlets are in your area? Does the franchise sell products or services that are easily available online or through a catalog? How many competing companies sell similar products or services? Are they well-established or widely recognized by name in your community? Do they offer a similar product at a similar price?
Your Ability to Operate the Business - Sometimes, franchise systems fail. What will happen to your business if the franchisor closes up shop? Will you need the franchisor’s ongoing training, advertising, or other help to succeed? Will you have access to the same suppliers? Could you conduct the business alone if you have to cut costs or lay anyone off?
Before you invest in a particular franchise system, think about how much money you have to invest, your abilities, and your goals. Be brutally honest.
The Name Recognition - Buying a franchise gives you the right to associate with the company’s name or brand. The more widely recognized the name, the more likely it is to draw in customers.
Training and Support Services - What training and continuing support does the franchisor provide? Does the franchisor’s training measure up to the training for workers in the particular industry? Can you compete with others who have more formal training? What backgrounds do the current franchise owners have? Is your education, experience, or training similar?
Franchisor’s Experience - Many franchisors operate well-established companies with years of experience both in selling goods or services and managing a franchise system. Some franchisors started by operating their own business. There is no guarantee, however, that a successful entrepreneur can successfully manage a franchise system. Find out:
* how long the franchisor has managed a franchise system
* whether the franchisor has enough expertise to make you feel comfortable. If the franchisor has little experience managing a chain of franchises, take any promises about guidance, training, and other support with the proverbial grain of salt.
Growth - A growing franchise system increases the franchisor’s name and brand recognition and may enable you to attract customers. But growth alone doesn’t ensure successful franchisees. Indeed, a company that grows too quickly may not be able to support its franchisees with the support services it promises them. Investigate the franchisor’s financial assets and resources; are they sufficient to support the franchisees?