If you’ve been thinking about escaping the red tape and finally becoming your own boss, investing in a franchise is one popular way to do it. Whatever industry you want to work in, there are countless franchises to choose from, but as with anything, some are infinitely better than others.
Before you decide what kind of franchise you want to invest in, it is important to understand a few things about investing in a franchise – from the franchise model to your personality type. In this blog, we are going to discuss five things you should consider before investing in a franchise.
1. The franchise model
The franchise model has been named one of the greatest business models ever invented, and for good reason. The franchise model has allowed hundreds of thousands of people who have never owned a business before to finally become business owners.
When investing in a franchise, you’re not only buying into the business, but you’re running it too. The person who owns the original business and is authorized to sell the business license to other people is the franchisor, and the person (you) investing in the business is the franchisee. So while you are essentially working for yourself you are working under someone else’s business model, which for many is a great opportunity to finally realise your dream of becoming a business owner with a greater chance of success than going it alone.
2. The franchisor’s business track record
Before you jump in and sign on the dotted line, it is important you do some research into the franchise first. You don’t want to sign on with a franchisor who is in debt or who has franchisees who are disgruntled and unhappy. Things to look into and consider include:
- The franchisor’s business record and reputation
- Speaking to existing franchisees to gauge their experience as a franchisee
- The franchisor’s infrastructure – is it comprehensive and stable?
- Any outstanding legal actions against the franchisor
3. Consumer demand
Researching consumer demand for the franchisor’s product or service is an important step to take before investing in a franchise. You need to research if there is currently a consumer demand for it and if the demand is expected to continue. Find out if there are many competitors and if more competitors are expected to enter the market in the next few years. It’s also a good idea to consider whether the product or service is of outstanding quality, and how it compares to the competition.
4. Your personality
Before investing in a franchise, it is important to consider your personality type. You will need to have some motivation to go into the business. For example, if you’re considering investing in a coaching franchise, well, it’s important you’re interested in coaching. And yes, everyone has a different reason for becoming an entrepreneur, so you just need to consider what yours is.
Depending on why you want to become an entrepreneur, every franchise will give you different results. Do you have a goal to make money? Or do you want more flexibility to spend time with family? Will the franchise be your sole source of income? Knowing why you want to become an entrepreneur will help you decide the type of franchise that will be a good fit for your personality.
5. Your cents and dollars
While the possibility for financial growth can be endless when investing in a franchise, you have to start with a good foundation. Now is the time to start making an inventory of your capital investment. Experts suggest you should have at least six months’ worth of capital for your living and expenses.
Depending on what franchise you invest in, the costs can greatly vary. Some range from less than $10,000 to six figures and more. Also, don’t fall for franchises who market themselves to be of a few thousand dollars. If the franchise seems too cheap to begin with, in the long run they can turn out to be quite expensive. Bottom line: do your research before jumping in with a franchise just because they are advertised as ‘cheap’. Click here to find out more about ActionCOACH Franchise opportunity.
