For those seeking new career opportunities, franchising can be an attractive opportunity, especially for anyone who wants to be their own boss. However, once you begin to jump into the research phase, you may become overwhelmed by the opportunities available, financial requirements, and entry process.
If you’re considering becoming a franchisee, consider these tips before making the leap.
1. Be Honest With Yourself
Would-be-franchisees need to ask themselves if they believe they are the type of person who can work within the franchise model. You will be expected to follow the guidance, procedures, and advice provided by the franchisor. And though you may have creative freedoms, you will still need to abide by the requirements of the franchise.
2. Study the Field
There is an assortment of books, websites, and videos available to help you learn more about franchising. One of the best places to start is the Federal Trade Commission’s Guide to Buying a Franchise.
3. Consider the Costs
One of the biggest hurdles in entering the world of franchising is often the cost. The total investment necessary to open a Hungry Howie’s franchise is between $251,375 and $495,850*. Other fees may include a royalty fees, marketing fees, administrative fees, and attorneys’ fees to cover the cost of drawing up legal documents. Keep in mind that your business may not be profitable immediately, which means when considering the costs, you should remember to have money set aside that will help cover your personal needs (i.e. mortgage, food, etc.)
4. Do Your Due Diligence
Always do your homework before investing in a franchise. Along with opening costs, you should also have information on:
- Expansion opportunities
- The relationship between the franchisor and franchisees
- The amount of time needed to invest in setting up a franchise
- Franchisor reputation
- Company growth and finances
Your potential franchisor should be able to provide the information you need and answer all your questions.
5. Talk with Franchisees
Take some time out to speak with other franchisees about the pros and cons of having a franchise. Ask them about what they have learned, how long it took them to become profitable, how they budgeted for the endeavor, how supportive the franchisor is, and about the challenges they have faced since opening. You may be able to request contact information for other franchisees through the franchisor, however, you may also find franchisee forums online to get in touch with others in the field.
6. Review the Key Documents
At least two weeks before the franchise agreement is signed, you should receive the Franchising Disclosure Document. Be sure you read the document as well as any another documents you may be asked to sign, such as a confidentiality agreement. If you have questions about the document, always ask the franchisor to provide a clear explanation.
The decision to become a franchisee will be one of the biggest decisions of your life, so it is important to understand what you are undertaking and do your due diligence before signing on the dotted line.
*Note: this is the figure that will appear in our 2017 FDD.
