Like a child in a candy store, the business opportunities available to entrepreneurs today are exciting and plentiful. With choices from every industry imaginable, the question isn’t about the number of opportunities, but more about which ones are best suited for your goals, skills and vision.
Particularly, in the world of franchising where the sky’s the limit in possibilities from successful, proven brands, determining what to consider when buying a franchise can significantly impact your financial and personal future. What follows is a guide that can help you make an informed and wise decision in selecting a franchise concept (or franchisor).
Self-Assessment for Choosing the Right Franchise
The first step in determining the best franchise fit is to undergo a candid and extensive self-assessment.
Identify Your Skills and Interests
Finding a franchise that combines your professional experience with your personal passions can lead to a fulfilling entrepreneurial journey, and it begins with clearly assessing your skills, interests, strengths, and goals. A helpful resource is Neighborly®’s Design Your Life booklet.
When evaluating your skills, consider the experience you’ve accumulated over the years across industries, and what fundamental skills and competencies that have helped you succeed could also be applied to business ownership.
Your interests are equally important. Think about what you’re passionate about and what motivates you. Perhaps most importantly, consider your goals and ask yourself what you hope to achieve by starting a franchise business, like building a legacy or securing your financial future.
Determine Your Financial Readiness
Evaluating your financial situation from the onset of your entrepreneurial experience is critical. It’s essential to determine early on how much capital you are willing to invest in a franchise and how much additional capital may be required long term for your operational needs and growth objectives.
For example, franchise options in the fast food or fitness industries often come with a high initial investment. However, there are many lower-cost franchise options available that are home based. Gaining knowledge of financing and function options will assist you in making these decisions. Fortunately, franchise owners have many financing options available.
Evaluate Work-Life Balance Goals
For many entrepreneurs, another important consideration is lifestyle preferences because some franchises may require more of a time commitment than others. Evaluating your desired work-life balance and how a franchise business would fit into it is an important consideration.
If you’re looking to maintain flexibility, spend more time with your family, or pursue personal interests as a franchise business owner, you may consider franchise concepts that offer more versatility, like those that have a home-based business model.
Franchise Industry Research
Franchise industry research is another important step when you are in the process of choosing the right franchise, ensuring the franchise you select aligns with your interests, skills, and goals.
Market Research
Different industries have different characteristics, growth projections, and challenges.
By diving into the specifics of each industry, you can assess whether it resonates with you and can provide for your ownership goals. Market research also helps you identify industries and niches with growth potential. It is also useful to look at trends, customer demand, and competition in your area of interest.
Franchise Options
If you have a good idea of the type of industry you want to invest in, explore various franchise opportunities within that field. This can help streamline your search toward finding the perfect franchise fit.
For instance, in home services, you have a variety of options to consider and it’s beneficial to consider a business that matches your interests. For example, if you are interested in the real estate industry, you can explore opportunities in property management or home inspection while someone who loves the great outdoors may consider landscaping, lawn care, or pest control.
Evaluate Franchise of Interest
Once you have found the best type of franchise to own and franchisor that interests you, there are additional steps you can take to determine if they are the right franchise fit for you. Some things to consider include the following:
Review Financial Documents
Review the franchisor’s financial disclosure document (FDD) to better understand the initial investment costs, ongoing fees, and potential earnings. Each franchise opportunity may have different financial considerations, so it’s important to make sure that they align with your budget and financial goals.
Conduct Franchisee Interviews
Reach out to current or former franchisees to learn about their experiences. This may include creating a list of questions regarding what support they receive from the franchisor, the challenges they faced, and their overall experience. This first-hand information can provide valuable insight into your future success.
Understand the Franchise Agreement
Carefully review the franchise agreement (FDD) because it is a legally binding contract that outlines the terms and conditions of your relationship with the franchisor and is the foundation for how you will operate your business. You may want to enlist the help of a legal advisor to understand the terms, obligations, or restrictions.
Evaluate the Location and Territory Options
Evaluate the franchise location requirements and territory exclusivity to ensure you are comfortable with the location options and potential competition. Your territory’s location, size, and potential customer base should align with your goals. A territory that is too small can limit growth potential, and a territory that is too large may require more investment, both time and money.
Look for Franchise Training and Support
Franchising is unique because you don’t always need prior industry or business experience to get started, however a strong support system is crucial to your success. While training and support are common benefits of franchising, not all franchisors provide the same options. Be sure to evaluate the training and ongoing support provided by the franchisor you are considering working with.
Research the Franchisor’s Brand Reputation
Leveraging a nationally recognized brand name is another distinct benefit in franchising, but you want to make sure that the brand is nationally recognized for the right reasons. Research the franchise brand’s reputation and customer reviews to see how you will be viewed by potential customers.
Find the Best Franchise for You
Knowing how to choose a franchise that is the best fit for your skills, experience, and vision is no easy task but is crucial to your long-term success. Neighborly, the largest home services company in the world, has developed a simple and effective Franchise Quiz designed to narrow your choices and point you in the direction that may be most aligned with your interest, goals and objectives from a franchise.