So, you’re thinking of fulfilling a long-time dream and going into business for yourself. You’ve even addressed the big question, which is whether to open a start-up, buy an independent operation or pursue your goal of ownership through a franchise.
For many, of course, the choice will be purchasing a franchise. With one, you’ll “hit the ground running” with a proven business model. Another couple of pluses? You’ll also be able to call on your network for advice and take advantage of various support programs offered to build your business.
If buying a franchise is your choice, then you’ll be in good company. Per an online article quoting the International Franchise Association (IFA), the number of franchise establishments is expected to increase by 1.6 percent to 744,437 locations in 2017 (latest data).
Of course, you’ll also face a large number of choices. Entrepreneur reports that the franchise industry is going strong and is more competitive than ever. As proof, they noted that no fewer than 1,000 franchising companies applied for their 2018 Franchise 500 Ranking. Undoubtedly, there are many more franchisors that didn’t bother to apply.
A website search will reveal long lists answers you’ll want to obtain from franchising organizations as part of your due diligence process. In their article, The Interview: What You Should Ask the Franchisor, Franchising.com suggests that you ask many questions, among them these ten:
- How much money can I make? While this is the most popular question, it’s often the least answerable. Every organization’s Franchise Disclosure Document (FDD) provides “financial performance representations” (FPRs) in a section called Item 19, but not all franchisors submit financial information to their parent franchisor. Even then, the data can be hard to read with any degree of certainty. Why? Many businesses don’t make money in their first year. Also, financial results vary from franchise to franchise based on the owner, the territory and the overall economy.
- Can I achieve my goals with your franchise concept? During your interview, be prepared with a list of questions regarding your most important goals. One often-asked question: Do you want to be a hands-on operator, or would you like to hire a manager to run the business? Be aware that some franchisors require personal involvement for first-time, single-unit buyers.
- Do you assist with financing? Does the franchising organization offer any help in obtaining financing? Can they recommend preferred lenders? Is the firm listed on the SBA Registry? One question to ask: Where have their current franchisees found the capital needed to start up and grow?
- What franchise territories are open near me? Where do you want to open your franchise? In your town? Within a certain radius of home, measured in miles? Or, are you open to a move? It’s believed by many that connections to the local community are a plus in building a successful business. After all, you’ll be more likely to know your customers even your potential employees. Of course, many franchisors also strongly encourage their franchisees to become involved in their community for business-networking and brand-building purposes.
- Will you help me find the best site? For many businesses and especially retail brands and restaurants, a good location is a key to success. On top of years of experience in siting units, many franchise organizations have sophisticated software tools and/or experienced outside vendors to help determine the potential success of a new franchise location.
- Do we share the same values? Every franchisor has a set of core values under which it operates. Many, too, have a unique culture just as you have yours. Do the values and cultures match up well? Bottom line: Will you be working with like-minded people? Or, will you struggle to act in accordance with the franchisor’s way of doing business?
- What type of training do you offer? Remember, a key advantage of owning a franchise over opening a start-up or buying an independent is your ability to capitalize on a proven business system. Of course, proper training in this system will be essential to your future success as a franchise owner.
- Who will I work with on a regular basis? They may be called field representatives or regional directors but it’s likely that whatever their title you’ll call them often! Often former franchise owners themselves, a good rep has been there, done that and can offer invaluable expertise. You’ll appreciate their help especially as you start up or when new programs and processes are introduced.
- Is there a Franchise Advisory Council? Operated by many franchising organizations, a FAC is a group of franchise owners that meets regularly with management to express the views of franchisees. FACs are a major plus. Why? Good franchisors welcome input from these committees. Through their feedback, the franchisor-franchisee relationship is continually strengthened.
- Do you have an “exit strategy?” You may think this is a strange question to ask when just starting out, but many business experts advise that you begin with the end in mind! Where do you want to be in 10 or 20 years down the road? Will you get any help when it comes time to retire or move on? You’ll want to carefully investigate your options here. In fact, it may be that you are the entrepreneur to whom an exiting owner is selling!
A parting piece of advice?
Allegra welcomes these questions and any others that come to mind when exploring your franchise ownership opportunities in the graphics communications industry.