7 Steps to Buying a Franchise
Franchising is a continuous relationship in which an established company licenses another party to sell its products, goods or services under its brand name and offers assistance in organizing, training, merchandising, marketing and managing in return for monetary consideration. A franchisee is a way for an aspiring entrepreneur to kick-start business wherein they don’t have to go through the hard work of establishing a new brand and system for they just have to follow a proven model for success. Franchising is appealing to both inexperienced as well as seasoned operators in running a business. It can be categorized as organized business models and straight-lined operations backing a business identity and its systemized procedures makes it a proven formula for making the grade in the business. Buying a franchise will help to achieve your dream of business ownership success. However, buying a franchise is not as simple as it may seem to you. The present article will provide you the key steps to buying a franchise.
Before you buy a franchise, it’s important to self-evaluate as to what you want from business. This step would help you understand your own motivations behind committing to the franchise. Following are some simple and obvious questions you need to ask yourself in order to know what you want.
• Do you want to be on the frontline or step back to manage the business?
• What’s your priority- Challenge of running your own business, financial stability, or flexibility?
• How much do you want to invest?
• What returns do you want from your investment?
Once these questions are answered, you begin to get a clearer picture of what you want, leading you to realize if you are right person to invest in franchising or not.
Conducting an initial research is the first step before buying a franchise. Owing to upswing in technology and digitalization, today it’s easier to find information about franchising. Multitudinous articles, online videos and e-books are there on internet which can be referred to gain more insight. It would include the following:
• Finding the apt franchises available that suits your budget, qualifications, and personal interests.
• Gaining information about different franchise opportunities available in your location.
• Research about the franchise requirements ensuring that you qualify and have right information.
• Understanding the kind of businesses that can sustain in your area.
• Ensuring that the business is not only sustainable but also interests you.
The purpose of getting franchise education is to help you determine whether franchising is a right choice for you and help you understand how to search and investigate apposite franchise opportunities. To find franchise opportunities that fit your needs, you can also use an online franchise website like franchiseinsider.in
In order to choose the right franchise, you will have to do self-evaluation and substantial research about franchise opportunities to gain franchise education. There are myriad options to choose from, making the decision to choose one a challenging one. If franchise opportunity goes well with your personal interests and past experience, then it certainly becomes an advisable one for you to invest in. Once you have gathered adequate information about how franchising works and the relationship between franchisee and franchisor, choosing the right franchise would become easier for you.
3.Franchise Qualification Requirements:
Since the reputation of brand is directly affected by the success and/or failure of their franchisees, franchisors set minimum requirements ensuring that their franchisees are qualified in terms of personal finances and professional experience. Although qualification requirements vary depending on the franchisors and the type of franchise you’re buying, the following are often taken into consideration:
• Credit Score: As mentioned earlier, depending on the franchisors and the type of franchise you’re buying, requirements do vary. Same is very much true for credit score, it too varies by franchisor however; generally, a score of 680 or higher is ideal.
o Net worth: Net worth varies with the type of franchise, some franchise requires a large initial investment and thus, it would demand on your part to have a higher net worth.
o Cash on hand: While financing the franchise, to cover the franchise costs or cover a down payment, you need to have sufficient cash on hand.
o Outside earnings: To set franchise in motion, to help with living expenses, you should have other forms of income and resources.
o Industry and Management Experience: Although industrial experience is mostly optional however when you have it, it adds confidence both in the franchisor as well as you for future business venture. Also, when you have management experience, it’s a cherry on the cake for it would help you lead a team and managing a business.
4. Consulting existing franchisees:
In case of new franchisees who are in search of reputed and quality brands, it is advisable to them that they consult the existing franchise owners before buying the franchise. Contacting current franchisees is an important step and you can’t afford to ignore it. From their experience, they can provide you a novel perspective and address your queries and questions, if any. Since there is no one who can give you better advice than the people who are already in the business, consulting these franchise owners would not only help you get their advice and insight but estimate costs of setting up and operating the business. In a nutshell, all the information needed before investing can be gotten from the first-hand experience of the current franchise owners. Hence, you cannot ignore to reach out and consult the existing franchisees.
5. Submit Request for Application/Consideration.
Once you have done adequate research, gained sufficient information about franchise opportunity and franchise education, convinced yourself that franchising is a right field for you to earn; select two or three industry categories such as dining franchise, healthcare franchise and automotive franchise. After that, select one or three concepts or companies from which to request information such as Pizza hut and Domino’s under food franchise & Mahindra and Autotech under Automotive industry. The companies will match you with a representative, and you should receive information back from them in a week by e-mail and/or telephone.
6. Attend the franchisor’s discovery day.
The corporate office of a franchise will hold a standard face-to-face meeting with the qualified prospective franchisees. You’re most likely to get invited to a discovery day only if franchisor knows that you’re sincere about investing in the franchise, and that you’ve the finance to invest. The discovery is an opportunity for you to learn the franchise offering and for franchisor as well to know and learn more about you. You should grab this opportunity to get answers of all your questions before making a commitment to buying a franchise. Due to Covid-19 pandemic, these days, discovery days are mostly held virtually. On this day, you’re most likely to meet the training director, support director, marketing director, real estate director, company executives, etc.
7. Franchise Agreement:
Once you undergo all the above steps, it’s time for you to take final decision. Signing a franchise agreement, is the final step in the mutual evaluation process and you meet the company executives who assist you in the journey.
Franchising is certainly one of the most secure ways of becoming a business owner. Buying a franchise can help you reach your dream of business ownership success. Buying a franchise has these steps involved in it, and now you know it all.
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