How to Tell if a Franchise is a Good Investment
Franchising is one of the most lucrative industries for entrepreneurs looking to branch out or start their very first business. You’re coming into an already established brand, you have tons of franchisor support, and there are approximately 95 different categories of franchising opportunities to choose from. Of course, once you narrow down your list, the next step is to evaluate the franchising opportunity and how to tell if a franchise is a good investment.
Below, we help you get the ball rolling on evaluating your dream franchise by offering five different ways to tell if a franchise is a good investment for you.
Good Management
Another thing to consider when trying to tell if a franchise is a good investment is the management. A franchise is only as successful as the team behind them, and you most certainly want to learn about the people behind the company and their experience. Find out how long the company has been franchising and how they’ve helped franchisees grow. The best way to learn about your team is to meet with the management team and the franchise support staff to gauge how it will be to work with them.
You can also check out the franchise disclosure agreement. This document will enable you to network with franchisees, suppliers, and others who have a history with the franchise. Additionally, an FDD can reveal red flags about a franchise’s culture, any litigations on their record, and a realistic idea of whether the franchise can financially support its system.
Industry Growth
Another way to tell if a franchise is a good investment is by checking growth trends. Some franchises are more in demand than others, which may impact your business’ success for better or worse should you decide to invest. In some cases, franchises will provide you with market research, but should they not, be prepared to do your own research. Examine what the growth potential is for the industry you’re considering on a national level, especially when it comes to the local market.
Next, take note of the most popular franchise trends and how saturated the market is with them. If there are too many, chances are, it wouldn’t be wise to invest in it. A sign of future growth and longevity can be determined by how many units a franchise has slated to open, as it may be a key indicator in a franchise’s ongoing success.
Support System
One of the things that makes franchises so popular is their unparalleled support system. The kind of training and assistance you receive from your franchisor can determine how long it will take to get your business off the ground. Even more important than a strong foundation is knowing the level of ongoing support they provide.
This support isn’t just limited to training but also encompasses marketing, advertising, and employee support. Is this franchise open to experimenting with the latest trends to help the system grow? The answer to this and other questions will help you tell if a franchise is a good investment.
Check the Legal Details
No business owner wants to find themselves in a legal battle, or worse, in a losing position. So, before you invest in a franchise opportunity, we recommend informing yourself on the ins and outs of the law and how they affect you as a business owner. If the legal jargon is too much to sift through, try hiring a franchise attorney to help you pour over the franchise license agreement.
This contract details the relationship between franchisors and franchisees, including trademark uses, royalty payments, all fees, support, and control. You want to ensure that the details are up to snuff and your liking. Plus, your attorney can even help you negotiate terms.
It is a Good Fit
Even if a franchise opportunity checks all of the boxes in terms of finances and support, a crucial way to tell if a franchise is a good investment is that it is a good fit for you. Meaning, the franchise fits your personality, passion, values, and skills. Running a franchise takes a lot of dedication; many owners often work long hours and have plenty of tasks, so if you’re unhappy with your investment, it will make it hard to do what it takes for your business to thrive.
Hundred Acre Consulting
Buying a franchise is a refreshing and hope-filled experience for any entrepreneur looking to own a business. However, rushing into a contract without first learning how to tell if a franchise is a good investment can interfere with your dreams of running a successful franchise business. Luckily, you have our team at Hundred Acre Consulting to help. Not only can we help you find the perfect franchise opportunity, but we can also consult you throughout your franchise career.
If you’re interested in working with us or learning more about our services, contact our team today!
