So you want to start a business by buying a franchise? This is an excellent opportunity that allows you to invest your hard-earned money in an already successful business model. You get to pursue a passion and earn more money to help you grow your wealth.
When buying a franchise, it pays that you do ample research on your franchisor’s success. For example, if you intend to grab a sandwich shop franchise opportunity, it is not enough that you know they have a number of successful franchisees who can testify to the company’s success. Success will still depend on you, as it is your business to run.
Buying a franchise doesn’t mean that you get to enjoy a higher success rate. Note that your franchisor will support you in any way they can, but you will make most of the decisions. To help you increase your chances of successfully running your franchise, learn about the common mistakes many franchisees are guilty of doing.
Not securing adequate funding before opening the business
For a franchise business to thrive, you will need to have enough capital to pay for the initial fees. This is why you should also have enough funding before you even open the business. You should not simply rely on your business loan. If you do, you can end up short during the hard ties, forcing you to close even before you break even.
Choosing a bad location
Where you set up your franchise can significantly affect your ability to succeed. Choose the wrong location, and you may end up in a hidden or saturated site. More often than not, wise franchisors won’t allow their franchisees to open a franchise in a bad location. But not all franchisors are like them. So make sure that you research well to pick the right location.
Underestimating all the costs
When buying a franchise, you are not to pay only the initial franchising and royalty fees. Most of the fees you may need to pay will be disclosed in the franchise disclosure document (FDD). But don’t be fooled; not all are listed there. Take your working capital as an example. To pay for your day-to-day operations, you need to have enough working capital set aside. If you underestimate all the costs, you may end up biting more than you can afford.
Hiring a franchise attorney a little too late
You may think that you don’t need a lawyer when buying a franchise, but in reality, you will need one the moment you decide to make a franchise purchase. A franchise attorney can help you determine whether the documents you are about to sign make sense. By hiring one, you will have someone who fully understands how franchising works. They can help explain the clauses you may find hard to understand, including the risks.
It is true that buying a franchise allows you to enjoy entrepreneurial life even with limited to no business experience. But you should always be careful about all the decisions you make. Remember that your franchise’s success will depend on every decision you make, and not just your choice of business.