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17 Key Factors To Consider Before Becoming A Franchise Owner

Forbes Business Development Council

If you're considering starting a business, buying a franchise can be an attractive option. Franchises offer the advantage of a proven business model, established brand recognition and ongoing support from the franchisor. However, before you make the leap into franchise ownership, there are several important factors to think about.

Below, Forbes Business Development Council members explore the essential areas that should play into your final decision about whether franchising is the right choice for you.

1. Think Through All The Requirements

Consider the investment requirements and ensure you have the capital to proceed. Starting a franchise is essentially a start-up; even if you invest in a well-known concept, it will require time to kick-start operations. Consider the franchise's accolades, brand standards and credentials, along with how that sets the brand apart from its industry competitors and how that will impact your market share. - Pete First, BrightStar Care

2. Investigate How To Leverage The Business Model

It's best not to forget the fundamentals: a franchisor is selling that opportunity because it's good for them. That franchise may be a lucrative opportunity for you, but it will always be more lucrative and lower risk for the franchisor. Successful franchise ownership is about understanding and leveraging the existing model, optimizing and then scaling and diversifying. - Jack Borie, Ubix

3. Assess The Alignment Of Core Values

One crucial factor to consider before taking the plunge is the compatibility between your personal values, skills and goals with the franchise's business model and ethos. Take the time to research and understand the franchise's core values, target market and operational processes to ensure a harmonious and successful partnership. - Brandon Batchelor, ReadyCloud Suite

4. Think About The Economy And Potential Risks

Franchising is such a broad term and can hit so many industries, segments and business types. The key is to understand what type of business is thriving, where you see the future, where the economy is and whether there are any potential impacts of a downturn. - Richard Lindhorn, VivoAquatics Inc.


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5. Enlist Help From A Franchise Agent

I just interviewed a franchise agent on my podcast and what I found out is that there are franchise agents that work on behalf of the potential franchisee to help them find the best solution for them. How involved do they want to be or do they just want to collect a check? Your franchise agent will navigate you through the world and you don't pay them, the final franchise does. - David Strausser, SEIDOR USA

6. Ensure That You Have Reliable Support

One crucial factor to consider when thinking of becoming a franchise owner is the level of support the franchisor provides. This includes training, ongoing assistance, marketing and access to resources. Strong franchisor support can significantly impact the success of your franchise, ensuring you have the necessary guidance to navigate the business effectively and overcome challenges. - Tomer Warschauer Nuni, Pink Moon Studio Ltd

7. Weigh The Overall Value

The first question would be, is this business something I can build without paying franchise fees? Do you have the operational processes and systems in place to build an independent business model that operates like a franchise? From experience, exiting a franchise versus exiting an independent business is very different. In most cases, a non-franchisee will see a greater exit value. - Tyler Trimbath, Trimbath Advisory Group

8. Learn Why The Franchisor Is Selling

The most critical thing to consider if you’re thinking about buying a franchise is, “Why is the franchisor selling?” There must be a reason why they are selling the rights to their franchise. If it’s a fantastic business idea, the company will often keep it to themselves, instead of franchising it out. Thoroughly consider the advantages and disadvantages, such as royalty fees. - Jim Mizouni, Sage Dental

9. Review The Franchise Agreement

The most important factor to consider when you’re thinking of becoming a franchise owner is the franchise agreement. Everything you need to know about the franchise business is already there, from how you should set it up to what you should expect. Review the franchise agreement meticulously, then pay attention to the smallest details so you can decide whether you’re ready to take on a new venture. - Bryce Welker, Big 4 Accounting Firms

10. Consider The Franchise's Longevity

Franchising is never a get-rich-quick solution; developing the market, servicing clients and getting them to come back are all ongoing, time-taking steps. Therefore, look at the financials from the angle where you are exploring profitability and growth from a more mid- to long-term range. Franchising, recession-proofing and contractual control are also important. - Mustansir Paliwala, EQUANS

11. Envision Your Ideal Lifestyle

As a franchisor, I always recommend that our prospective owners consider the lifestyle they want to lead. They need to have clear goals and expectations for the income, yes, but also for the time, effort, risk and emotional energy they are willing to invest in the business. Due diligence includes inspecting what you are willing to bring to the opportunity in front of you. - David Mattson, Sandler

12. Ensure The Franchise Has A Good System In Place

The most crucial factor to consider when contemplating joining a franchise is whether the franchiser has a well-defined, transparent and valuable system in place. It is essential to ensure that the franchisor has a comprehensive and understandable operating model that aligns with your business goals and values. Then, you can make an informed decision and mitigate the risks. - Dylan Nguyen, FG Entertainment Network

13. Be Diligent In Your Research

A franchisor should have a proven business model, comprehensive training programs, ongoing support and a strong brand reputation. As always, one of the things anyone who wants to run a franchise should do is do their due diligence. - Wayne Elsey, The Funds2Orgs Group

14. Talk With Former Franchise Owners

How is your involvement in the franchise augmented by the franchise, especially against being an independent business owner? This could be multi-faceted, including branding and marketing, systems and processes and access to supply or manufacturing hubs. Whatever it is, it needs to be documented and understood before you make the leap. A good practice is to talk with owners who have left the franchise. - Peter Schravemade, REACH ASEA

15. Evaluate The Franchisor's Reputation

Ensure that the franchisor has a strong brand reputation, a history of proven success and an effective support system in place to help you thrive. Carefully review the franchise agreement's terms, including fees, royalties and other obligations that come with being a franchisee. - Kuldeep Bhatnagar, Fusion Business Solutions Pvt. Ltd.

16. Focus On Profitability

Profit is everything. There is no point investing in something when there is no market demand or revenue involved. - Zeenath Kuraisha, Asia Pacific Sales & Marketing Academy Pte Ltd

17. Look At The Break-Even Points

Break-even points are the most critical point for the franchise owner because the limited capital and resources should have cash returned. In particular, the revenue for the first year is important to sustain the business. Therefore, market research is the first priority to have sufficient customers and buyers in the local town life and view. - Gyehyon Andrea Jo, MVLASF

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