As exciting as buying into a franchise may be, it’s equally important to do your due diligence to increase your chances of success. If you’re thinking of buying a franchise, here are three things you need to know before making that commitment.
Do your research
Before signing with a franchisor, make sure you know all there is to know about them. You could ask them questions such as how long an average store takes to break even or see a real return on investment (ROI), how long is the franchise agreement, and what is the royalty structure? You may want to consider meeting up with existing franchisees to ask questions such as how long they’ve been in business for, most challenging moments and how many staff members they have? Due diligence is critical to understanding what you need to build a successful store.
Understanding the total cost of getting your franchise up and running is one of the most crucial parts of buying a business. Understand items like the total capital required, upfront cash contribution, annual licence fee increases and estimated monthly expenses.
Understand what’s involved
Running a franchise business means using someone else’s business model. In order for your business to thrive, it’s crucial to have a thorough understanding of the business model so that you can apply it to your operation. Be sure you have the required time to spend working in your business. And most importantly be sure to have a relationship with the franchisor – after all, they are the experts in their model!