Advice about Small Business


Choosing the Right Franchise for You

Choosing the Right Franchise for You

You’ve decided to go for it: take the plunge and become your own boss. Franchising is an excellent way to work for yourself while mitigating some of the risks involved with starting a new business. But how do you choose the right franchise for you?

Interests and Abilities

Franchising isn’t limited to fast-food establishments. Instead, franchises are available in a wide variety of industries, from house cleaning and beauty supplies to auto service and tutoring. The first thing you should do is evaluate your own interests and skills. What type of franchise would you best be suited for? Does the business require specialize training or licenses? You will be much more successful if you utilize your previous experience and training in your franchise.

Another thing to consider is your prior management experience. The type of franchise you purchase may direct the type of employees you will most likely be hiring and managing. For instance, as a fast-food franchisee you may be working with students and young employees. If you are used to managing established, older professionals in a business setting, you may have to rethink and relearn your management techniques.

It’s important to think about the time required to devote to the business. If you want your schedule to be 9-5, five days a week, then a fast-food franchise that is open seven days a week may not be the right fit for you.

Additionally, it’s important to determine if your franchise will be retail- or service-oriented. Will you be selling tangible items? Or will you be providing a service, such as house cleaning or financial advice? These things will directly affect your start-up and monthly operating costs.

Investment and Costs

While the costs vary according to the industry, all franchises have an initial fee to become a franchisor. It’s important to evaluate how much money you have to invest in the business. How much of your own money will you put into the business? How much money will you be required to borrow from a lender? If you don’t have the finances to back the business yourself, or if you have a less-than-strong credit rating, you may want to consider the possibility of bringing on a business partner to bolster your finances.

This is a great time to identify your tolerance for risk. Be brutally honest with yourself. It may take a while for your business to make money. How long can you work without a paycheck? What contingency plans do you have for the months that you may lose money?

Sit down with an accountant (or even a friend who’s good with spreadsheets) and analyze start-up costs as well as monthly operational expenses. This will give you a good idea of the income your business will need just to break even every month.

Other Considerations

Competition is a key factor when choosing a franchise. After identifying one or two industries that you are interested in, it’s a good idea to research direct and indirect competition in your market. For example, if you are thinking about investing in a carpet cleaning business, find your direct competition by researching other carpet cleaning businesses also exist in your area. Indirect competition might be companies who rent carpet cleaning machines.

Finally, think about your future goals and plans. Will this be a long-term venture for you, or will you consider selling the business in a few years? Are you counting on this business to provide for your retirement? After the franchise is established, do you want to continue to work long hours or would you rather cut back? These things are extremely important to consider when you choose a franchise.

As you consider the right type of franchise for you, sit down and write out all of the items mentioned above, then use it as a checklist when you are comparing different franchises. A few hours of planning can help you narrow down your options, and save some time in deciding the right business for you.