Starting a business means taking on a lot of responsibility. Everything from funding the venture to hiring, inventory, facility management and building the customer base for a new brand falls squarely on the owner. For some startups, the challenges of beginning from scratch may not be as appealing as buying into an established franchise.
On the same token, jumping blindly into a business venture is never advisable, even if the intended franchising company is well-known in a community. Exploring options, doing research, speaking to those who've been through the process and seeking financial tips on which ideas will best suit individual plans are all essential steps to take before signing any paperwork.
Do some homework
There are many brands that jump to mind when franchising is considered, many of which are restaurants and hospitality vendors. There are many of these business models present in every aspect of industry. Determining which is most likely to be successful can vary by region. Researching the history of each prospective business is essential before seeking a commercial loan, according to The Wall Street Journal.
Gaebler reported that a review of Small Business Association (SBA) data can reflect the best and worst of the franchise industry. In one recent article, the publication showed that even well-known brands – Quiznos, Cold Stone Creamery and Blimpie, to name a few – had worse than a 35 percent failure rate for new franchisees. The list proves that familiarity and purported popularity may not mean anything when it comes to revenue and prosperity.
Network and legwork
The Wall Street Journal points out that using online resources like the International Franchise Association's (IFA) website to look up different businesses by name and industry is a good jumping-off point, but it shouldn't be the entire basis of a decision. Talking to people involved in a desired franchise could imply speaking with current owners or attending events by that company to get familiar with the internal intricacies, according to Entrepreneur.
Entrepreneur magazine also recommends inquiring with the Better Business Bureau or a financial advisor to see what kind of track record a company has in terms of customer service and franchisee support. Consistent negative information from external sources should outweigh even the most appealing business plan. Even if the kind of work itself is appealing, there are a multitude of companies in each industry such that a prospective owner isn't forced to choose a particular entity to partner with.