All franchises have the possibility of being successful and they all have the possibility of failing.
Even though opening a franchise gives you the advantage of being affiliated with an established business, there is still a lot to learn before taking the leap.
The success of any franchise will be based on what you can offer to the franchise and what the franchise can offer you.
What you can Offer to the Franchise
Investment
Different franchises have different fees so it is important to consider all the fees associated with each franchise you are interested in. Once you calculate the initial investment for the franchises you are interested in then you will be able to determine which one best fits your financial situation.
If you don’t have the capital for opening a particular franchise then you should find one more suited to your financial situation.
For example, if you want to open a Bruegger’s Bagel Bakery franchise then you need a net worth of at least $200,000 with liquidity of $100,000. The estimated cost of opening your franchise is from $230,000 to $489,000 plus the additional cost of real estate. As you can see this franchise requires a significant investment, which should only be made by someone who has the money and commitment to this type of franchise.
A more affordable franchise is from Dollar Store Services. With only $48,900 you could have the turnkey franchise up and ready to go. Only $15,000 of liquid capital is required for this franchise and estimated capital investment ranges from $48,900 to $600,000.
The number of successful coffee franchises has grown significantly along with the franchise fees. However, these franchises have very high franchise fees. So, if you have a coffee franchise idea in mind and don’t have much to invest consider one just starting out, like the Coffee Heaven Franchise. The minimum investment required is $9,999, which is one of the lowest fee franchises to choose from.
Business Experience
Many individuals searching for franchising opportunities in their own careers do not ever consider their own business experience and whether or not they are suited to making their franchise work.
For example, if you have worked at a fast food restaurant for 15 years then you know all the ins and outs of that particular industry. Opening a fast food franchise outlet of your own makes the most sense since you have the business experience and the knowledge in that industry to succeed.
On the other hand, if you have been a banker for 15 years and then decide to open a fast food franchise outlet, you will not have the same level of business experience to make it as successful as possible.
The importance of having some basic business experience in the specific franchise industry you are looking at cannot be stressed enough. Even if you undergo training, your past experiences are essential. With this in mind, there are always options to satisfy your goals.
You may have zero fast food experience, but have always dreamed of opening a McDonalds. If you choose to do so you will need to team up with a manager who is very knowledgeable and experienced in the fast food business to help you make your new franchise successful.
Not all franchises significantly help franchisees once they get up and going either. Some questions to consider include; will you need the franchisor’s ongoing training, advertising or other assistance to succeed and will you have access to the same suppliers? In fact, if you are looking for your franchise to hold your hand because you don’t know the business then you will probably have a much slower rate of success or even fall flat on your face.
Personality
The ideal franchisee is a creative, outgoing entrepreneur who is eager to succeed, but also willing to listen to other people's advice.
You must be able to balance your entrepreneurial initiative with a willingness to comply with the business formulas used by the franchiser. Remember, a successful partnership between a franchisee and franchiser involves a mutual understanding of each other's values and achievements.
Ask yourself how this decision will affect your family. Do they understand the risks and sacrifices required, and will they support your efforts? Beginning a franchise business is a major decision that does not ensure easy success. However, an informed commitment of time, energy and money by you and your family can lead to an exciting and profitable venture.
Do not choose the type of franchise you would like to open based solely on which one you think will be the most lucrative. Instead, choose a franchise based on whether or not you find the work involved enjoyable. Reflecting on your own passions and interests and matching them with potential franchises will help you pick a franchise that you will be happy to dedicate all your time and energy to in order to make it a success.
What the Franchise Has to Offer You
Beyond what you can offer to the franchise in terms of your level of investment and business experience there are many aspects to consider in terms of the characteristics of the franchise. Areas such as the market demand for what the franchise has to offer, the competition in the market and the franchisor’s experience are key factors to evaluate.
Demand
Is there a market demand for the franchisor's products or services in your community? Is the demand seasonal? For example, lawn and garden care or swimming pool maintenance may be profitable only in the spring or summer. Is there likely to be a continuing demand for the products or services in the future? Is the demand likely to be temporary, such as selling a fad food item? Does the product or service generate repeat business?
Competition
What is the level of competition, nationally and in your community? How many franchised and company-owned outlets does the franchisor have in your area? How many competing companies sell the same or similar products or services? Are these competing companies well established, with wide name recognition in your community? Do they offer the same goods and services at the same or lower price?
Name Recognition
A primary reason for purchasing a franchise is the right to associate with the company's name. The more widely recognized the name, the more likely it will draw customers who know its products or services. Therefore, before purchasing a franchise, consider:
- The company's name and how widely recognized it is.
- If it has a registered trademark.
- How long the franchisor has been in operation.
- If the company has a reputation for high quality products or services.
- If consumers have filed complaints against the franchise with the Better Business Bureau or a local consumer protection agency.
Training and Support Services
Another reason for purchasing a franchise is to obtain support from the franchisor. What training and ongoing support does the franchisor provide? How does their training compare with the training for typical workers in the industry? Could you compete with others who have more formal training? What backgrounds do the current franchise owners have? Do they have prior technical backgrounds or special training that helps them succeed? Do you have a similar background?
Franchisor's Experience
Many franchisors operate well-established companies with years of experience both in selling goods or services and in managing a franchise system. Some franchisors started by operating their own business. There is no guarantee, however, that a successful entrepreneur can successfully manage a franchise system.
Carefully consider how long the franchisor has managed a franchise system. Do you feel comfortable with the franchisor's expertise? If franchisors have little experience in managing a chain of franchises, their promises of guidance, training, and other support may be unreliable.
Growth
A growing franchise system increases the franchisor's name recognition and may enable you to attract customers. Growth alone does not ensure successful franchisees; a company that grows too quickly may not be able to support its franchisees with all the promised support services. Make sure the franchisor has sufficient financial assets and staff to support the franchisees.
So, What Franchise Idea is Best for You?
Now that you have evaluated your liquidity, total investment, and personal business experience and the various aspects of the franchise you are interested in opening, you will be that much closer to finding the right franchise idea.
Always keep in mind that while having the financing and experience there is still one very important element- personal interest.
You have to be generally interested in the business you are looking at. If you are not personally interested in selling hamburgers and making the general public want to eat more hamburgers then you are going to have a tough time making your hamburger franchise outlet a success.
