With 90% of startups failing in their first two years of operation, it should not come as a surprise why many would rather choose to franchise. But here’s the thing, just because it’s an already familiar name does not mean that success is guaranteed.
Make sure to ask yourself these key questions before buying a franchise.
Are you willing to take on the responsibilities of managing your franchise business?
Franchises have been successful because of business synergy – talents and ideas are brought together, advertising is funded by group, etc. Not to mention, the franchise system offers start-up training and ongoing support. But of course, you cannot always rely on others. For your franchise to be successful, you have to man it yourself. You must be willing to work harder than before, and it may mean hiring and interviewing employees yourself, mopping the floors, and handling the cash register.
Will you enjoy the business?
Many people buy a franchise for profitability’s sake only to find out later that they do not enjoy the business. When franchising, choose something that you will enjoy doing for the next 10 to 15 years. Determine your interest or, if not, your passion. Doing so will make the business more like a hobby.
Are you willing to follow the franchise system?
Consistency of product and service is key to franchising success, and this is only possible by following the franchise system. People who love thinking outside of the box, very entrepreneurial and have a hard time conforming to a predetermined formula should think several times before buying a franchise.
Does the franchise have a good track record?
Do your homework and get to know your chosen company well. Know the principal directors, particularly their business background. Also, check the franchise financial history or profitability. A new and booming franchise may look attractive, but it cannot guarantee long-term success if the franchisor has no sufficient experience on how to fully develop the system.
Can you afford it?
Under capitalization is one of the major causes of franchise failure. While your franchisor will be able to give you a good estimate of the startup costs, additional costs could arise due to leasehold improvement needs, higher utility expenses, and the like. So make sure to double the amount of your capital to avoid financial shortage that could cripple your franchise business.