Things You Should Know Before Buying A Franchise

HispanicBusiness.com:

Visit Other Franchises
Talk to a lot of other franchisees and visit their sites, even if they are outside your area, says Nancy Weingartner, executive editor of Franchise Times magazine, based in Minneapolis, MN.

“If possible spend a couple of hours there, maybe a whole day, just watching traffic in the business,” she said. “Ask questions, like how do they financed buying the franchise and how they find and attract staff.”

Ms. Bennett recommends using the Internet to find them, typically by searching for blogs. “I’d suggest contacting as many as 60 franchise owners before you move forward,” she said. “Twenty won’t talk to you. Twenty more will give you the company line. And the other 20 will maybe tell you the truth.”

Expect To Work Hard
“A lot of times people think they’re going to walk into a franchise and maybe just put in a few hours work,” says Ms. Weingartner. “If they’ve spent their life working for somebody else, they may have a romantic view of having their own business. The reality is you have to be prepared to pitch in any time and not be afraid to do the dirty work.”

Many franchisees work 90 to 100 hours a week. Often that includes doing menial tasks such as cleaning toilets. That can be a tough adjustment for some people.

Know The Costs
Obviously, this is a critical question. Most franchises don’t start making money until they’ve reached 18- to 24 months of operation. It’s critical to know that the primary reason most franchises fail is under-capitalization.

Getting the money can be another problem because banks have tightened up on lending. It helps if you’re looking at an established concept, have some experience in the field, and have another source of income. That might mean the husband or wife keeps his or her day job.

Look For The Track Record
Franchise expos are filled with exhibits from untried and untested companies. “Stay away from them,” Ms. Bennett warns. In fact, she says, stay away from any franchise that doesn’t have at least 30-to 50 operating businesses.

With hundreds of parent companies failing every year, there’s strength in branding, whether at the national or regional level. “Branding is an umbrella of goodwill in bad times,” said Ms. Weingarter.

Start With One
Don’t be tempted to buy more than one franchise, regardless of how good the offer from the franchisor may seem. “If you end up with five or six instead of one, you’re probably going to run out of money,” warned Ms. Bennett.

It is far safer to be cautious. Only when the first franchise is established and turning a profit, should you consider expanding.

Hire An Attorney
Not just any attorney – you need an attorney who specializes in franchise law to look over the contract and the pages of supporting documents.

Buying a franchise is a big step for just about every entrepreneur. It can be risky, but it can also be exciting and profitable, if you take your time and make careful decisions. Hopefully, the six steps above can help you do just that.