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10 THINGS TO CONSIDER BEFORE BUYING A NEW FRANCHISE

Making the decision to purchase a franchise is one of the biggest decisions you can make, therefore it’s a decision that shouldn’t be taken lightly.

People buy into a franchise model because of the benefits, such as branding, marketing, systems, training, and support, to name a few. Whilst it’s easy to get swept up in the excitement of this decision and all of the positives, there are plenty of factors that you need to consider before signing on the dotted line.

As a Business Coach, I constantly see what makes a successful franchisee, therefore I’ve summarised these into my top 10 things to consider before buying a new franchise.

1 Why

Always start with understanding your why or reason. Why do you want to buy a new franchise in the first place? Why do you want to buy into the franchise model you’re considering?

Whilst owning a franchise can be incredibly rewarding, it can also be tough and challenging, therefore you need a deep reason as to why you want to get started in franchising. Interestingly, money is generally not the primary reason, as money is a byproduct.

Your primary reason should be doing something that you love. With so many choices available, find the franchise model that you can see yourself really loving day in, day out. As Steve Jobs said, “The only way to do great work is to love what you do.”

2 What do you want?

Get clear on what you want. What are your short, medium and long-term goals? Take the time to understand what you want to accomplish from your new franchise. The clearer you can be on your goals, the easier it is to know if you’re on or off track.

In addition, you need to plan for your franchise success. Goals without plans are wishes, hence you need to build daily, weekly, monthly plans.

3 Self Belief

Henry Ford famously said, “Whether you think you can or think you can’t, either way you’re right.” You must believe that you can create a successful franchise business, as ultimately, your success is up to you.

As mentioned, some of the benefits of buying a franchise are access to comprehensive systems and ongoing support from your franchisor, however you’re ultimately responsible for the actions you take across your territory.

4 Conduct Due Diligence

Make sure you understand everything about the new franchise you’re buying. Your due diligence should include brand research, current franchisee feedback, the future direction of the franchise model, and so on.

Don’t be impatient with your purchase, as

failure to conduct thorough due diligence can result in costly mistakes.

Purchasing a franchise also involves various legal and tax implications, therefore be sure to seek advice from trusted advisors.

5 Expected Turnover

Forecasting potential gross sales is essential in determining the commercial viability of a franchise, however it’s difficult to ascertain what the sales revenue will be of a ‘greenfield’ or new franchise.

Instead, seek sales information from the franchisor and other franchisees. Get an understanding of what other successful franchises look like, specifically, what they did in the early stages of their franchise, along with the franchise potential.

6 Understand Costs

To establish the true picture of a franchise’s commercial viability you need to understand how much things cost. Things like raw ingredients, materials, equipment, labour, rent, utilities, marketing, fees (ie. franchise fees), and so on.

It’s great to have plenty of sales, but ultimately, it’s about your profit, or what’s left over after all the costs and expenses have been deducted.

7 Be Purchase Ready

Buying a new franchise requires capital, therefore you need to consider how you’ll fund the initial investment.

Numerous franchise models already have some financial solutions, however you can also be organised by familiarising yourself with what lending is on offer.

8 Learn to Love Numbers

Franchise success is based on numbers (data), not emotion, therefore you need to be open to loving numbers. I encounter plenty of franchisees who are great at their trade or profession, but don’t understand how their business is performing.

Nowadays, there are comprehensive programs available to capture all the data relating to your franchise, but, in the end, it comes down to you having a basic level of financial acumen to be able to interpret this data.

9 Be Resourceful

You don’t have to have all of the answers, but you do need to have the desire to find the answers. This is known as ’resourcefulness’, or the ability to find quick and clever solutions.

Support and ongoing training is one of the key reasons that people decide to buy a new franchise, however you still need to be confident in asking for assistance.

In addition, recognise that whenever you start a new franchise it will probably feel unfamiliar and uncomfortable, therefore you need to be prepared to do what’s required in order to learn new skills and constantly improve.

10 Create Awareness

The franchisor should already be marketing and promoting the franchise model, however there’s also an opportunity for you to market and sell locally.

Creating awareness of your franchise and the goods or services you provide is essential in your ongoing success. Let people know about what you do.

Whilst there are countless ways to create awareness, if you don’t take any action you’ll never sell a secret.

In summary, this top 10 list is by no means exhaustive, rather it’s a guide of key considerations before you hand over your hard earned money.

Buying a new franchise is an exciting time, filled with enormous potential, therefore just make sure that you buy into the right franchise model for you. ❖

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