If you’re looking to buy a franchise, there is a danger that you may make assumptions about the viability of the business and whether it will work for you. It is sometimes assumed that a franchise is the ‘safer option’ because an established business model that has been proven before is being used.

However, the risks of failure are just as high for franchisees as they are for their independent business counterparts. To reduce this, proper research and due diligence should be done in the same way as any prospective independent business owner would or should do before setting up shop.

Firstly look for something that you may already have an interest in rather than just going for something that you believe will deliver the most profit. Take into account the skills that you have already that may lend themselves well to your proposed sector, and also how much time and effort you are going to be able to devote towards making your business a success. If you don’t have the necessary skill-set, how easily can you learn? You should look to be self-sufficient wherever possible so that in the event that your franchisor closes down you can still carry on as an independent business. This would obviously be difficult, but could be necessary depending on the franchise that you become involved with.

You should also have a clear understanding of how much capital you have to invest in your business. How long will it be before you see a return on your investment? Will you run the business yourself or have someone else manage it for you? Running any business, whether it’s a franchise or not will consume a lot of time, especially in the beginning; are you prepared for the commitment that is required? Many entrepreneurs sacrifice a lot of social and family time during the formative period of their business, with their goal of getting all that back and more eventually. It therefore helps to have a supportive spouse and family.

A franchise is a long-term commitment and not something that you can just give up in a few years. Think of this twenty years down the road; will you still be running the business then and what are your goals for the business at that point? If the business is not something that inspires and captures your imagination then you should think long and hard about whether it is even the right business for you, and franchise agreements are not short-term.

I’ve already touched on the return on investment, but have you really studied the franchisor’s business model? How are other franchises doing? How fast is the company growing? Growth would suggest that there is demand for whatever it is that the business produces or provides, but you should nevertheless investigate the successes of other franchisees. Try and understand how long franchisees were trading before they broke even. If there are too many franchises changing hands, this can be a bad sign too.

You should also look at the strengths, weaknesses, opportunities and threats to your business. Something we like to call SWOT analysis which allows you to asses in an objective way how your business would measure up against the competition. Be honest here and try to put yourself in the shoes of the customer. Don’t be afraid of competition; if there’s no competition it could be a bad sign unless you’re entering a brand new marketplace.

As you can see, there is a lot to consider before venturing into any business, including a franchised one. Getting it wrong can be a very expensive mistake.

Due to the current economic climate and the lower start-up costs, many people are looking at internet-based franchises, or businesses where the business plan has been laid out for them. Even with a ‘virtual’ business, you should still perform the same checks and measures to ensure that it is the right business or franchise opportunity for you. As a business that is Internet-based will inevitably require some good marketing skills, the one area that you will want to look into will be online marketing training and coaching to successfully market and grow your business online.

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