As author of two editions of Tips & Traps When Buying a Franchise I have interviewed many successful and not-so-successful franchisees along the way. Because of this I feel qualified to give you some ideas on how to start a franchise and how you might approach sorting through franchises for sale to select a Franchise System to buy into.
If you’re new to looking into the selection of a franchise you are probably overwhelmed by the sheer numbers and variety of choices of franchises for sale. Today, there are probably over 1,000 reputable franchises and another hundred or two that haven’t hit our radar yet. So, yes, you do have some work in front of you.
There are many considerations to make when you are considering how to start a franchise. Don’t attempt to start talking with a number of franchisors until you have gone through the exercise of analyzing your needs, capabilities and limitations in relation to a franchise business. You will need to ask yourself questions like: Where will the business be located? Is there a specific industry that I would like to work in? Am I more attracted to a product or a service business? How much can I invest in the franchise business? How much should the total investment be?
Large vs Medium or Small
Owning a large, older franchise systems can be looked upon as lower risk investments. Most likely the franchisor is well capitalized, has a demonstrated track record, and an experienced management staff. But, probably most important to a franchisee is the powerful advertising reach and good name and brand recognition.
The downside of the big, well-known franchises for sale is primarily the large entry cost, and often the scarcity of good locations available.
Starting a newer, smaller franchise systems are more prevalent than the big stars. So, you will have a greater number to choose from. The pluses of these systems are that the up-and-coming franchisor tends to be in an uncrowded industry that is not overrun with competitors. More good locations will be available.
Newer franchise ownership pose a somewhat higher risk than the established one. There is no demonstrated track record. All the bugs in the system may not be worked out and you’ll have to experiment right along with them.
Operating Your Franchise
To actually begin working the business, you will have a number of important decisions and tasks to accomplish. All of these can have an impact on the success of your start up. Here’s a list:
- Choose the legal business form
- Negotiate real estate leases and rents
- Buy equipment and inventory
- Supervise structural changes and the “build-out”
- Recruit and select employees
- Plan local promotions and advertising