Becoming a franchise owner can be the adventure of a lifetime and one of the most fulfilling undertakings you can embark on.
When starting your first franchise, there are a few things to consider. Some of the most important questions to ask are if you’re truly ready to start and manage a business and what kind of franchise suits you best. There are so many franchises to choose from that choosing the right one can be overwhelming.
In this article, we’ve listed the most important considerations that you need to take into account before beginning your first franchise.
To answer your most important question...
What Is the Best Franchise to Start?
Well, it depends on many factors: the initial investment, location, terms, the level of commitment and amount of time you’re willing to put in, potential profits, etc.
Once you answer the following questions, it should be easier for you to find the top franchises to start with.
1. What is your skill set and what do you want to get out of the business?
Your skillset is an important consideration if you’re looking to start a franchise in specialized industries like sports or education.
While it’s not usually required to have prior experience, it will certainly be helpful to have a background or work experience in related fields. If you’re already looking at franchising opportunities relevant to your skillset, then you’re right on track.
There’s also training and support to factor in. Look at the franchise disclosure document (FDD) to see what kind of training and ongoing support the franchise system provides to franchisees. This should tell you what to expect and how much homework you might have to do beforehand.
What do you want to get out of the business? If you don’t have a straightforward answer to the second part of our question, consider the industry and the type of work you’ll be involved in. Does the idea of it satisfy you and meet your expectations?
Part of our expectations and motivations is the possibility of profit. Here are some related questions to ask yourself:
- How much profit are you expecting?
- How much growth do you want to have in your franchise business? How many units are you expecting to open in a year?
- How long are you willing to wait to realize these expectations?
Once you’ve answered these questions, have a discussion with the franchisor about whether the franchising opportunity you’re considering is a practical way to achieve these goals.
Some other items you’ll want to consult are annual reports, financial disclosure documents, and the average franchise unit growth.
2. Is there a franchise that matches your desired location, work hours, and responsibilities?
Location is very important for the success of any business. Knowing the region, its culture, and key demographics will prove beneficial.
Consider the demand, potential market, and growth in a region as well as relocation options. What franchise locations is the company targeting? Is there a potential match?
Other factors to look into are the work hours and responsibilities you will be expected to undertake. Some franchises make it mandatory for franchise owners to be directly involved in running the franchise. Others, like Dream Vacations, allow you to work from home and have more flexible arrangements.
The industry you’re looking to enter and the way a franchise is set up play a huge part in determining these factors, so evaluate them carefully.
You’ll also want to spend some time deliberating the length of the initial franchise agreement. Agreements generally last between five and 10 years while some are almost 20 years long. How decided are you on the franchise and the industry it’s in? And what kind of timeframe are you willing to invest in it?
Lastly, don’t forget to examine the conditions should you decide to pre-terminate your franchise agreement. The easier it is to get out of, the better for you if you change your mind later on.
3. Do you have enough money for startup costs?
Look into the total franchise fees and how much you need to pay upfront. If you can manage this amount yourself, great. If you can’t, you might want to look at financing options or find another franchising opportunity within your budget. Cruise Planners is a great example of a franchise that offers in-house financing.
When you’re thinking of costs, you should also consider your budget for the first few months after opening. Many businesses need at least a few months to generate stable revenue that can be reinvested.
Other than the startup costs, there are also the annual royalties and advertising fees you have to pay. Check how frequent the payments are and what percentage of sales will go towards them.
4. Are you able to take on more than one job at once or are you looking for something with fewer hours per week?
How much time are you willing to commit to your new franchise? If you have other commitments, it’s a good idea to consider how much time a new franchise might entail and look for one that matches the time you’re willing to invest in running it.
Some franchises offer flexible arrangements like the ability to work from home, the possibility of operating from a mobile venue, and flexible hours. Often, you can hire a manager to run the day-to-day operations on your behalf.
5. How many people will be working with you in this new venture?
Franchises generally mention the minimum number of employees you need for their business services. This means you not only have to hire people, but train, manage, and pay them as well. You’ll also be responsible for the actions of your employees to a certain extent.
If you can spare the expense and your franchise agreement allows it, get a hiring manager with experience in handling teams. Otherwise, you can also look at franchises that don’t have an employee requirement.
Small business franchises like those offering cleaning services don’t require a high employee count or hire contractual services for fixed periods. This means you won't be required to manage too many employees. The Jan-Pro commercial cleaning service is a great example of this.
In contrast, a Taco Bell franchise needs a certain number of employees to operate.
6. What type of customer service experience do you have (i.e., retail, hospitality)?
Customer service differs from industry to industry, so look at your personal experience. Pick a franchise that’s closest to the industry you have experience in.
The customer service demanded by retail outlets, for example, is different from the customer service you’ll need to provide in hospitality.
Final Thoughts
Buying a franchise is a great opportunity that doesn’t entail building brand recognition from scratch, but it comes with costs, responsibilities, and commitment.
We hope our list of questions and considerations helps you find the most profitable and manageable franchising opportunity that’s best suited for you.
