Trying to figure out whether a franchise is a good opportunity can be complicated and difficult. It's easy to get bogged down in details like the financials of the parent company, comparisons with other franchises or locations, or the minutiae of many franchise contracts. All of this is important information, but being overwhelmed does not lend itself to good decision-making processes.
There are ways to simplify the process of researching a franchise and make it more manageable without risking making a bad decision. Here are 5 simple ways to evaluate a franchise to see if it's the right one for you.
1) Observe and Go With Your Gut
Looking at financials and vision statements and corporate policies does not really give you all the information needed to determine whether a franchise will fit into your plans and be the opportunity that's right for you. Firsthand observation of a current franchise location, done anonymously if possible, provides valuable information that cannot be obtained any other way.
Going with your gut feeling about the franchise seems counter-intuitive to the process of research, but chances are that if you have owned a successful business before, you have developed a gut instinct for whether or not a concept is "working" in the general sense. Just because something looks good on paper, does not mean it will bring success in the real world.
Note: Going over financials and contracts is still an important step in deciding whether a franchise will work for you.
2) Get Professional Help
Not only are accountants and attorneys trained to handle specific tasks like analyzing financials and interpreting contract terms, they are likely far better at it than you are. Spending a little money for their expertise in the research phase will save you countless hours of precious time and will also provide more perspectives and opinions for you to consider as you make your decision.
3) Test the Franchisor
Franchisors will be on their best behavior when they are trying to woo you to buy one of their franchises. Finding a way to see how they react under reasonable pressure can help to prevent lots of problems down the road as you work closely together to achieve success in your particular franchise location.
Now I'm not suggesting you create a made-up situation to see how they handle it, but observing their demeanor during negotiations that tend to have their tense moments can give a good indication of what you will be dealing with. Furthermore, bending over backwards not to upset the franchisor during the research phase seems like a logical idea, but can create unrealistic expectations for the future. Treat the franchisor with the respect you typically do, but allow problems and situations to play out in a typical way to gauge how the franchisor will be to work with.
4) Expect to Give More
Whether it's start-up costs, working capital, or the amount of hours you will work, everything is going to take more than you expected. A reasonable guideline is to double your estimate of initial investment, according to Entrepreneur Magazine. Things almost always take more than initially budgeted, and planning for that can prevent you from running out of capital midstream.
If your projections are wrong and you don't need that much in resources, you can probably become profitable that much sooner.
5) Know Yourself
Does the franchise fit into your skill set without too much stretching? Can you commit to long workdays until things take off? Are you going to grow tired of the concept before it really becomes worthwhile? Knowing yourself can help prevent problems down the road that can directly impact your franchise's bottom line.
Franchise Gator has thousands of solid franchise opportunities to help anyone seeking success who is willing to do what it takes to get there.