Franchising is a great alternative to starting a business from scratch, especially for inexperienced entrepreneurs. However, not everyone is made out to be a franchisee, just like not everyone can start a business all on their own.
If you are not sure if franchising is the right move for your entrepreneurial career, here are several signs that could mean you are cut out to be a franchisee.
1. You are willing to follow an existing system
People who are not willing nor comfortable with following other’s standards and systems are likely not meant to be franchisees. The concept of franchising is based on following an existing and proven system of business operations. If you are willing and ready to play by the rules, then you have a great chance of succeeding in this type of business endeavor.
But things are not always set in stone when you take out a franchise. For example, if you buy a closet storage franchise and have ideas for new designs, you are free to make suggestions to your franchisor. Remember that every business needs continuous development to succeed, and your franchisor will likely welcome fresh ideas that can help the entire company thrive.
2. You have the financial capacity
Franchising may or may not be more expensive than starting a business from scratch; it all depends on the type of business that you would otherwise start if you don’t take out a franchise. Nevertheless, purchasing a franchise will require a certain level of financial commitment from you.
Depending on your franchisor, you can either pay for the franchise in full or make staggered payments (similar to making mortgage payments on a house). The best option between the two will depend on your financial capacity—more specifically, whether or not you can pay the full amount. If you decide to pay in full, you will still need to have healthy cash reserves in case of unexpected business expenses. Paying in installments, on the other hand, can provide you with a better cash flow, but can also limit your profitability.
Each option has its own advantages and disadvantages. Either way, you should be fully financially capable (both in business and personal funds) before you purchase a franchise.
3. You’ve done your homework
One of the main advantages of purchasing a franchise is that you don’t do much of the heavy lifting; the franchisor already has a tried-and-tested system that you can follow to achieve similar results, and you won’t have to do a lot of trial and error.
However, this doesn’t mean that you can go into the business blind. Although there will be people to guide you once you become a franchisee, having a good foundation of knowledge is imperative to speed up the learning process, as well as to avoid common mistakes along the way.
With that in mind, ensure that you do due diligence before taking out a franchise. Study the company, the market, and the industry itself. More importantly, you must have at least basic knowledge of common business processes, such as accounting, marketing, and operations.
4. The franchisor’s values are in line with yours
It wouldn’t make sense to do business with a company that you don’t agree with, especially when it comes to mission and values. For this reason, it is incredibly important that you find out what the company’s core values, mission, and vision are before entering into a deal with them. Mission, vision, and values may seem trivial, but they make up the core of the company and often dictate how the business works to get ahead.
Whenever you take a franchisor into consideration, analyze their mission, vision, and core values. If they are in line with yours, this is a great sign that you will be part of something that you can support.
5. You are ready to work with experienced people
When you start a business from scratch, you will likely do most of the heavy lifting yourself—from conceptualization to business planning, and everything in between. Most business owners like it this way because they have full control over the business and have the final say over everything. But when it comes to a franchise, you will have to work with the franchisor’s team in order to bring your franchise to success.
Franchising a business is not for everybody; there may be a lot of things that you are uncomfortable with, and it may take a lot more commitment than building a business from scratch. That said, if you are thinking about taking out a franchise, determine if these signs apply to you to see if you are ready.