Buying a franchise can have many perks. Unlike launching your own business, you’re helping to expand an existing business by running a new outlet or division for them. You’re able to adopt a working business model and market your company using an established brand. You don’t have to spend years laying the foundations and can get stuck in straight away.
Of course, when buying a franchise, you need to carefully consider what type of franchise. There are over 790,000 franchises today for you to choose from.
It’s also worth preparing yourself for some of the downsides of running a franchise. Only 65% survive within 4 years of starting a franchise. Below are just four of the biggest considerations that will help you to make the right choice for a franchise.
What is a Franchise?
A franchise is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system. (According to Franchise.org.)Of course, when buying a franchise, you need to carefully consider what type of franchise. #franchising Click To Tweet
What are the most popular franchises you can buy today?
- Taco Bell
- Planet Fitness
- Great Clips
- Anytime Fitness
- Kiddie Academy
- SuperGlass Windshield Repair
What’s your budget For Buying A Franchise?
The cost of a franchise is typically based on its capital. Some franchise owners will charge up to two years of capital, whereas others will charge only two months. There may be other fees required when setting up the franchise depending on the company.
Most franchises cost between $50,000 and $200,000 to get started. You can buy some franchises for less than $10,000, but you’ll have to hunt around for these deals and your choice of companies will be limited.
Consider how much you’re willing to spend. Most franchisees take out a business loan to buy a franchise, which can reduce the upfront costs considerably, but does mean paying extra in interest.
Of course, when buying a franchise, it’s important that you eventually make your money back. The company you’re buying a franchise from should have good profit margins and there should be a steady demand for the product or service. This is something that you should spend time looking into beforehand – possibly with the help of a financial advisor.
Where does your expertise lie?
When choosing a company to buy a franchise from, try to consider industries that you have experience in. For example, before you buy a food restaurant franchise, consider whether you have any experience working in a restaurant. Consider your interests and strengths, and let these guide you – if you enjoy gardening and have experience working in landscaping, it may make sense to choose a landscaping franchise.
You can buy a franchise without having any experience in that industry. Some franchise owners will offer training and will simply look for franchisees that are passionate and entrepreneurial. For example, you could start your own business in mosquito control by buying a mosquito franchise that offers training. Just make sure that you’re willing to work in this trade and that you don’t feel it’s beyond your capability.
Is the company the right fit for you?
You may already have an industry in mind that you want to buy a franchise. However, you also need to consider that different company will have different models, different rules, and different approaches.
Ideally, you want to find a franchise that is the right fit for you. Make sure that you agree with their company policies. For example, some fast-food restaurants may require you to follow certain recipes or even follow a script when serving customers.
It’s also important that you like their style of branding – if you don’t like how their uniform looks or don’t like the audience they appeal to, you may want to avoid buying a franchise from them.
Would you be better off launching a startup vs. Buying a franchise?
When you buy a franchise, you’re restricted as to how you run your business. For those that want complete freedom to build their own brand and create their own policies, launching a startup may be a better option. Starting a business could also be slightly cheaper upfront in some cases, however, it will take longer to establish your business and attract customers.
Ultimately, launching a startup requires more patience, but it can allow you to exercise more creative freedom and spend less money upfront. Consider whether you’re better off building your own business as opposed to buying a franchise.
Have you ever owned a franchise or considered purchasing a franchise? I’d love to hear more about it in the comments below.