For many who hear the siren song of entrepreneurship, it can be a little scary to jump in and go it completely alone. Transitioning from employee to entrepreneur affects you tremendously -- personally, professionally and financially -- and franchising is often a good middle ground. Think of it as a gateway, if you will, to small-business ownership.
If you're interested in franchising, your first place to start is online. There's a ton of information out there which makes it easy to explore the wide range of possibilities available to you. But in order to get a full, three-dimensional view of which business is right for you, more info is needed.
Here, five important things you need to know about franchising that you won't find online.
As a franchise consultant, I save people lots of time and effort by matching people to businesses based on what they bring to the table.
This includes the all-important skills they have as well as their financial qualifications. We construct a business plan based on their abilities and develop a financing action plan based on their credit score, liquidity and overall net worth. With this information, franchise matching can begin.
Countless times people have contacted me, all excited about a specific franchise, only to learn they didn't qualify due to skills, finances and/or territory being available where they live.
Part of the matching process a franchise consultant provides is conducting territory checks on businesses available where a franchise candidate wants to own a business.
Is there a substitute for talking with owners one-on-one to hear firsthand what it's like to be a franchisee with a particular brand?
Who better to ask about the rewards and challenges of being a franchisee? Be sure to ask what hours the franchisee works and what issues or situations take up the most time on a daily basis. Ask if it's possible to have a work/life balance and if there's flexibility in the owner's schedule.
How do your values, attitudes and beliefs match up with any particular franchise? What mechanisms are in place to train and support franchisees? What common ground do you share with the franchisees, your potential colleagues? How focused is the organization on helping franchisees to thrive?
You'll learn the answers to these kinds of questions through conversation with franchise staff members and franchisees.
Understandably, the number-one question most franchise prospects want answered is how much money they can expect to make.
What will my first year or two look like? When can I expect to turn a profit?
The only way to get a good understanding of a franchise's costs and income potential is through careful review of the Franchise Disclosure Document (FDD) and speaking with franchisees. Note that it's optional for franchises to make a written earnings claim or "financial performance representation" in their FDDs, and most franchises do not make them. Generally, FDDs are provided to franchise prospects after one or more qualification conversations are held with a franchise representative.
And now we're back to the beginning, researching franchises online. Once a prospect requests information, there may be an automated email response. Expect a franchise representative to call soon -- to talk, to actually get to know you, to answer your questions and help you understand their business model. Your one dimensional search is over. If there's mutual interest and minimum qualifications are met, the conversations with the rep continue.
Along the way, the FDD is disclosed and conversations with franchisees occur. You'll begin to develop a 3D image of the franchise. Do you see yourself in it? If not, keep searching. And the cycle starts over again.
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