You crave change and more control over your work life. You want to own your own business, but since you don’t want to go it completely alone, you want a franchise. But this is a BIG decision, so you need to be sure you’ve done your due diligence before committing. So now what? Here are 11 things you definitely need to consider before you invest in a franchise:
- Know thyself first. There are many different types of franchise businesses out there—it’s not just fast food! There are franchises with products, such as food, and others with just services, such as senior care, and much more in between. Figure out your passion based on your experience in life as well as work. For example, many senior care franchise owners first learned about in home care services when a loved one needed assistance or they stepped up as a family caregiver. As they saw the incredible value, they looked into owning a senior care franchise as a new career.
- Meet and greet time. Once you’ve selected the type of industry you want to invest in as a franchisee, then you’ll schedule what’s known as “Discovery” days with different franchisors. These are important opportunities to get a feel for the company culture you will rely on for support for years to come.
- Money—how much will you really need? As you meet with franchisors you will have get into the details of start up costs beyond the franchise fee. What are the typical costs of setting up a location, launching it and employing people in the long term? How much are royalties? What do royalties cover? Are there additional fees? How much extra working capital is recommended in addition to the initial investment estimates? Have you set aside some personal living expenses while waiting to get your business off the ground, or is a spouse covering this?
- Read the fine print. The Franchise Disclosure Document (FDD) is a gold mine of valuable information about each brand, its revenues, and more. The details can make or break a decision so don’t just skim it as you rush to sign on the dotted line. Each side in this agreement should be engaged in a discussion about the finer points in the FDD. Make sure you ask the franchisor to clarify items that you are unsure about.
- Keep talking. Don’t just rely on the franchisor for information. The FDD will include contact information on some of the franchisees already in their network. You are encouraged to contact these folks and ask them anything—how long before they earned a profit? What’s most challenging? What’s most rewarding? How is the ongoing support from the franchisor?
- Back to you. Even if you have found your passion, you still need to get paid. Create a budget—not just the investment cost—that includes office rent, payroll, your own salary, utilities and other basic overhead costs you will be expected to cover. You cannot be a one-man (or woman) operation so in this budget, you’ll need to determine which areas you’ll hire experts to keep the books or sell services. This will help you paint the big picture.
- You’re not exactly an entrepreneur. An entrepreneur is someone who comes up with an idea for a business and builds it from the ground up. That has its own challenges and rewards and suits those who like to create their own processes, call all the shots, and reinvent the wheel. In a franchise system, there is a proven model of success based on years of others trying, succeeding or failing, and trying again. In other words, there is a structure and rules to follow, so you’ll need to be onboard with that.
- Get a crystal ball. No, even a fortune-teller can’t tell you if your business will succeed or not. However, you should look into the future. In order to have a successful local business, you need to be involved in the community. Yes, maybe someday you can work on your business and not in your business, but how long are you prepared and willing to be stay in one place, putting in the hard work to build a good reputation?
- Is there room for growth? So, you buy one territory. Is there room to buy another one or does another franchisee own what’s surrounding you? While no franchisor can guarantee what market forces will pop up in years to come, explore the potential for expanding your business someday. Expansion opportunity may also include adding new or optional services as you grow.
- Don’t bite off more than you can chew. Sometimes when buying a business for the first time, people want to own the whole market and may end up overextending themselves. This can mean spending too much on buying multiple units and staffing them, or not understanding what is involved in running multiple businesses, especially as a new owner. Be sure you know what is required financially and contractually for each unit you purchase.
- Look for the exit. Think about your ultimate goal for starting a franchise. Do you want to pass the business on to your children, or build it up and sell it for a nice retirement? Talk to former franchisees before you become one. What was it like to sell their business? Did the franchisor help them find a buyer? What can you expect to make on the sale? Where do your revenues need to be in order to sell?
If you’re ready to take the next step in senior care franchise ownership, please visit our franchise website to do more research or to submit a request for more information.