According to the Wall Street Journal, 30 percent of franchise owners maintain tenure less than two years. In fact, 32 percent of franchise owners maintain tenure for three to five years. Operating a franchise is difficult, but manageable through following the advice below.
Only Select a Proven System
Every franchise claims to have a proven system, established market and high earning potential. However, only the best systems will have a well-acknowledge business model that works against variables such as geography or customer demographics. Even more important, the franchise must have streamlined systems for every operational function. This proves that the system is efficient with regular improvement updates. During the initial investigation, be sure to ask how key systems have changed over time, such as payroll, marketing and client services. Therefore, a well-established brand is more beneficial for a first-time franchisee.
Examine the Franchise-Franchisee Relationship
It is important to ask existing franchisees how they feel that they have been treated by the franchise. If possible, personally visit the nearest franchise and meet with the owner. If this isn’t possible, reach out to franchises across the country through email or social media. Inquire about their past and current satisfaction with the franchiser. Equally important, reach out to previous franchisees. While some may have unreasonable complaints about the franchise, others will have candidly open opinions about their overall experiences. Any franchise that is unwilling for potential investors to meet with existing franchise owners is a definite warning sign.
Assess Potential Earning Potential
Assessing potential franchise earnings is difficult because every franchise will have unique profitability factors, such as location, existing customer relationships and the owner’s experience. However, the potential profitability of a franchise can be explored through assessing the projected financials costs of current franchises. Potential franchisees can investigate franchises that have both succeeded and failed. In truth, the best way is to meet with a failed franchise owner who is willing to openly discuss the financial challenges that they experienced. Entrepreneurs with limited experience can consult with a franchise expert through the Small Business Association’s free SCORE program.
Most entrepreneurs investigating a franchisee often over focus on operations, finances or administration. However, business and coaching support is critical for first time business owners. The most successful franchisors understand that aspiring entrepreneurs need oversight and guidance. Therefore, they will offer a proven, structured coaching system. This will include professional development opportunities and an excellent client support system. Anyone interested in a franchise should always visit the franchise headquarters if possible.
Looking back, buying a franchise is a great way for entrepreneurs to build a profitable career. Anyone looking into a franchise should assess the systems, relationships, earning potential and available franchise support.