There are a few pointers which should be taken care of before beginning a franchise-based business.
Making a Personal Judgement:
Before looking at the list of possible franchises, one should take stock of his own attitude, skill, experience and interests. Assess your own strengths and weaknesses. Everything from the time needed to be invested per day to the idea of relocation of home should be thought about.
Research and Scrutinize:
There are literally thousands of companies and products that sound good to invest in but before becoming a franchise for any of them, try and investigate into the details of the companies including their credit history and their market share. Try and delve into the possibility of further expansion of the franchise and evaluate the scope of the demand for the listed products being offered by the franchisor.
Grilling the Franchisor:
After having closed down on a few companies, start to inspect each of them as a potential franchisor. Contact each of them and ask for information including the company’s relation with its investors and a list of the franchisees that have been closed down or those that have quit on the parent company. Try and investigate them on everything from the company brochures to their recent advertisement and the belief system of the franchisor.
One easy way of getting an honest picture about the franchisor is by questioning the listed and existing franchisees. They would be able to provide an honest opinion about the services and support that is provided by the company as a franchisor. They’re the best source of information regarding the quality of the products and the kind of image a franchisor has in the market.
What Kind of Profits You Want?
An important factor while selecting a franchise worth investing is figuring out whether the investment is going to bring in profits in the long term or are the franchised products and services going to bring in profits shortly after setting up the business franchise unit.
Judging the Franchised Product/Service:
It is essential to judge if there is a demand in the market for the product/service being offered by the franchisor. Many franchises are geographically and demographically specific and have some distinct advantages and shortcomings.
For example, setting up a franchise of frozen meat products in a predominantly vegetarian locality would be a mistake. Before purchasing any franchise option it is imperative to conduct a proper market research for its suitability factor and to judge if it is affected by cultural and regional factors.
Similar franchises may already be functioning in a market. Before opting for a franchise, it is vital to assess whether if the market of the franchised product has any scope for further growth. The growth indicators in that franchise industry should be climbing. Just because a particular franchise has yielded profits in the past, it should not be taken for granted that it would do so in the future.
The Franchise Agreement
Another tricky part of a franchise deal is the understanding of the franchise agreement. A franchise agreement should protect your profits and your rights in the investment. One should never purchase a franchise unit without seeking advice from a franchise lawyer. A goof franchise option will usually be accompanied with training and support for running the business. The company involved in providing the franchise should be a stable and respectable brand that can be depended upon for training demands.