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Topics & Tips
Franchising
10 Steps for Choosing the Right Home Based Franchise Income Opportunities
There are many well-known
home
based franchise income opportunities
available in almost every industry you can think of.
Some are well established with proven systems and
support structures in place, while others are relatively
new. Choosing the franchise that suits you will reduce
risk and raise the levels of success.
While specialist advisors are a necessity to assist you
throughout your business venture, the following steps
will help you to evaluate any franchise opportunity you
are considering.
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1. KNOW YOURSELF
The first topic of research will be you. Consider your
strengths and weaknesses. What is your level of
knowledge, where might you need development and are your
skills transferable? Will you be able to manage the high
level of personal energy required to get yourself
started? Are you a team player,
or do you prefer to work alone?
Will you require staff? Only after you have analyzed the
depth of commitment required to start a
new business venture will you be
in a position to make a specific choice.
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2. KNOW YOUR FINANCIAL COMMITMENTS
The costs of a franchise can vary considerably. While
smaller investments can be affordable through personal
assets, most potential franchise owners will need to
consider additional borrowing. The increase in small
business ventures have compelled many banks to have
business start up kits, which include information on the
requirements of starting a business, self evaluation
reports and financial planning forms. No matter how much
security you can offer, banks need to be convinced that
loans can be serviced. What the proposed business can
afford is more important than what you have.
3. KNOW WHAT FRANCHISING IS
Find out all you can about franchising. In particular
focus on the unique relationship that exists between
franchisees and franchisors. Look for a Franchise
Association closest to you to obtain guidance from. Once
again the banks can provide a wealth of information in
this regard; it is now within their interests to build
relationships in an extremely competitive financial
environment by providing separate departments that serve
the franchise industry. Search the internet, but be
aware that different countries will have different
compliance issues. Even if you have a preference this
early in the game, research is still a vital process
that needs to be completed. There is also the chance
that research will open up alternatives you may not have
previously considered.
4. KNOW THE INDUSTRY
You have already analyzed your skills and knowledge; now
look at the different types of businesses that you feel
are potentially suitable. Identify the different
companies that are offering opportunities in the area.
Consider the requirements of the proposed industry and
see if it matches your skills and aspirations. It is not
necessary for you to have worked in this industry
before, but you need to feel comfortable and happy
working in this environment. How durable is the
potential market? Who are your customers? Who are your
competitors? Is it an international franchise or newly
introduced to your area? Is the market large enough to
sustain a long-term business? Get to know the
franchisor. You need to be happy with the industry you
will be working in and with the people you will be
working with.
5. EVALUATE THE FRANCHISE
Once it is established that you are interested in a
particular franchise, information will be sent to you.
Read all the information you receive thoroughly noting
any first impressions and any initial questions you may
have. Discuss and clarify any concerns you have with the
franchisor. The size of the franchise should not
restrict the availability of information you need
regarding the company's history and profile, market
conditions, the franchisees role and the costs involved.
Examine company records in detail, check credit
references. Closely examine the outline of the franchise
particularly the manner in which the franchise is sold
and operated. Look at all the details of any
commissions’ payable on the sale of the franchise and
ask to see references of present franchises and company
outlets. Make sure you understand the components that
make up the franchise fees.
6. QUESTIONS FOR THE FRANCHISOR
The greatest source of information you will obtain
regarding the franchise system is from the franchisor.
Prepare for every meeting with your list of items that
need to be clarified. Ask all the questions you need in
relation to the franchise, products and services. Do not
be afraid to ask questions relating to the profitable
viability of the franchise. You need to find out the
success of the franchise, talk to other franchisees as
well. What training and support exists? Is the franchise
bound by any code of practice?
7. TALK TO THE FRANCHISEES
The surest method of evaluating any franchise will be to
talk to a number of franchisees in existing businesses.
In this way, you will get a realistic assessment. What
value have they got from their business, both financial
and personal? Make sure you chose the franchisees to
speak with. You may not get a balanced picture if you
speak only to 'approved' franchisees. The perspective of
international outlets can also be of use, but, remember
to consider different conditions, population structures
and competition.
8. SPECIALISED FINANCIAL ADVICE
There could be some reluctance on the part of the
franchisor to reveal financial projections in case they
are viewed as guaranteed. However, what reports are
available should provide relevant figures based on the
existing climate. Whether the projections you receive
are forecasted or guaranteed, an accountant with
franchise experience should be able to give you
qualified advice. Encourage your accountant to work with
the franchisor. The franchisor will be able to offer
cash flow, borrowing and overdraft guidelines. Take all
the advice you can get. As a new business owner you do
not want to start your business under capitalized.
9. SPECIALISED LEGAL ADVICE
It is important to fully understand the terms and
conditions of the franchise agreement. Understanding
your obligations and the franchisors responsibilities
need to be clear from the start. Use a lawyer that
specializes in franchise agreements to define legal
terms you have difficulty with to save you time and
money
10. CHECK WHAT YOU ARE PAYING FOR
Before you sign on the dotted line, make sure you know
what the up-front franchise fee includes and what
refunds you may expect if you change your mind or fail
the training. What are the performance criteria? You
must also have a clear understanding of any ongoing
costs. You need to know what fees are payable, how they
are calculated and what they are for.
To maximize your chances of success it is imperative you
do not rush your decision. Check out all aspects before
you commit yourself. Be 100% certain that the franchise
is right for you before you part with your money.
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