Are you dissatisfied with your current job and considering starting your own business? Do you start from scratch and build it yourself or buy a franchise to take advantage of the work done by others. It’s no surprise that a lot choose franchising. After all, a proven business model and recognized brand is less risky and should make it easier while providing some stability. But franchises are not all created equal.
I had the opportunity to discuss the pros and cons of franchising with franchise attorney, Bill Groble, Law Offices of William Groble. Based on our discussion, here are a few things to keep in mind.
What To Consider When Franchising
A quality franchise will provide total support and guidance in critical areas including business development, operating systems, hiring, training, technology, and vendor relationships. But before jumping in, take the time to do proper due diligence to gain a complete understanding of the opportunity. This includes:
- Read the Uniform Franchise Offering Circular (UFOC) and Franchise Disclosure Documents (FFD) as these provide the levels of support and obligations of both parties.
- Examine the financial and operational history of the franchise.
- Understand the industry and competition.
- Learn about franchisee-franchisor relationships. Talk to current and past franchisees.
- Investigate the quality of the franchise network. The reputation of other franchisees has a spillover effect on you – good or bad – that can impact your success.
- Learn about the brand and reputation in the market. Do some research. Search engines and social media can be helpful, so use them. The brand is one of the things you are licensing – makes sure it’s worth the investment.
- Create cash flow models and growth projections. Think the best case, worst case and something in between. Remember to include the monthly franchise fees in your projections.
- Review and discuss with a franchise attorney. While not always communicated, franchise agreements are negotiable.
The right franchise offers a lot of advantages and shortcuts, but franchising is not for everyone. If you like having complete control or thrive on creativity, franchising may not be for you. Most franchisors have strict requirements regarding branding, marketing, vendor or supplier options, products and services offered and sometimes even dictate the customers you serve. While you do control the culture, values, and people you hire, you must follow the franchisor’s operating systems and other obligations outlined in your agreement.
Build Your Start-Up Like a Franchise
If you choose to go the traditional start-up route, you can learn a lot from franchises. Create a unique selling proposition and build your brand around it. Develop systems that are repeatable by others and ensure a consistent buying experience for your customers. Hire quality people who can run your systems.
Even if you don’t want to franchise your new business – build it like you do. Your people and systems power success. They are the key to a business that is simple, fun and profitable.
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