Is Franchising for You?

As with any business, the first step in determining whether or
not to enter into the venture is to assess your reasons for going
into business. If you feel you need a change, or you’re tired of
having other people tell you what to do, then you should reassess
your decision before investing your time, money and energy
because operating a business requires more than a need for a
change, or the desire to do as you please. Purchasing a franchise
like any other business requires a total commitment of your time,
energy and financial resources. If you are not prepared to invest
these qualities and resources into your franchise, then you
should stop at this point.

EVALUATING YOUR SKILLS AND EXPERIENCE

Identify Your Reasons

As a first and often overlooked step, ask yourself why you want
to purchase a franchise. This question, although basic, is an
excellent way of evaluating your reasons for going into business.
List every reason you identify, no matter how farfetched it may
seem. Divide your list into two separate components. Separate the
viable reasons from the trivial reasons and categorize them
accordingly. It isn’t unusual for reasons to range from the
desire to be your own boss to the desire to be a billionaire.
Whatever your reasons, remember that your future is at stake so
try to be objective. Your checklist should include reasons such
as these (check each that applies to you):

YES
* Freedom from the 9-5 daily work routine ____
* Being your own boss ____
* Doing what you want when you want to do it ____
* Improving your standard of living ____
* Bored with your present job ____
* Have a product or service for which there is a
demand ____

Some reasons are better than others, none are wrong; however, be
aware of tradeoffs. For example, you can escape the 9-5 daily
routine, but you may replace it with a 6 a.m. to 10 p.m. routine.

After assessing your reasons for going into business, next
conduct a self analysis to determine if you possess the personal
characteristics needed to be a successful franchise owner.
Consider questions such as:

Personal Characteristics

YES NO
1. Are you a leader? ___ ___
2. Do you like to make your own decisions? ___ ___
3. Do others turn to you for help in
making decisions? ___ ___
4. Are you willing to accept managerial
assistance from the franchisor? ___ ___
5. Are you willing to comply with the
provisions outlined in the franchise
contract? ___ ___
6. Do you enjoy competition? ___ ___
7. Do you have will power and self
discipline? ___ ___
8. Do you plan ahead? ___ ___
9. Do you like people? ___ ___
10. Do you get along well with others? ___ ___

Personal Conditions

These questions cover the physical, emotional and financial
strains you will encounter operating a franchise.

YES NO
1. Are you aware that running your own
franchise will require working 12-16
hours a day, six days a week, and maybe
even on Sundays and holidays? ___ ___

2. Do you have the physical stamina to
handle the work load and schedule? ___ ___

3. Do you have the emotional strength to
withstand the strain? ___ ___

4. Are you prepared, if needed, to
temporarily lower your standard of living
until your franchise is firmly established?___ ___

5. Is your family willing to go along with
the strains they, too, must bear? ___ ___

6. Are your prepared to invest, and possibly
lose, your savings? ___ ___

Answering “yes” to any of these questions means that you have
some of the skills needed to operate a successful franchise; a
negative answer means that you may have to acquire these skills
or hire personnel to supply them.

Experience

Certain skills and experience are critical to the success of a
business. Since it is unlikely that you possess all the skills
and experience needed, you’ll need to hire personnel to supply
those you lack. There are some basic and special skills you will
need for the particular franchise you purchase. By answering the
following questions, you can identify the skills you possess and
those you lack (i.e., your strengths and weaknesses).

YES NO
1. Do you know what basic skills you will
need to operate a successful franchise? ___ ___

2. Do you possess those skills? ___ ___

3. When hiring personnel, will you be
able to determine if the applicants’
skills meet the requirements for the
positions you are filling? ___ ___

4. Have you ever worked in a managerial
or supervisory capacity? ___ ___

5. Have you ever worked in a business
similar to the franchise you want
to purchase? ___ ___

6. Have you had any business training
in school? ___ ___

7. If you discover that you don’t have the
basic skills needed for your franchise
will you be willing to delay your plans
until you’ve acquired the necessary
skills? ___ ___

When you complete your self-analysis, discuss your results with
your family and financial advisor. Their feedback can help you
make the right decision. If you all agree that you have most of
the skills needed to operate a successful franchise, then you
should feel comfortable proceeding with your plans. If, however,
they feel you lack most of these skills, then you may need to
consider delaying your plans until you are better prepared. Above
all, be honest and objective with yourself; after all, it is your
future.

A more detailed self-analysis, the “Small Business Entrepreneur’s
Checklist,” is located in Appendix I. This checklist is designed
to assist you in determining what you actually know about
operating a business, and the skills you will need to do so.
Review it carefully before deciding whether or not to purchase a
franchise or to go into business. If you discover that you lack
many of the skills needed to operate a successful franchise, you
may need to take some training courses or hire personnel to
compensate for these deficiencies.

Once you are certain that your reasons for going into business
and the franchise you’ve selected are viable, gather the
information that you will need to make an informed decision from
sources, such as: 1) a directory of franchises, e.g., the
Franchise Opportunities Handbook (published by the U.S.
Department of Commerce), 2) the disclosure document, 3) current
franchisees, 4) other references, such as U.S. Small Business
Administration (SBA), Federal Trade Commission (FTC), Better
Business Bureau, local chambers of commerce and 5) professional
advisors.

Many new small business owners choose franchising over starting a
new business because it provides easy access to an established
product, reduces many of the risks involved in opening a new
business, provides access to proven marketing methods and in some
instances provides assistance in obtaining start-up capital from
financing sources.

Franchising can be advantageous as well as disadvantageous to
both the franchisee and franchisor. A few of the advantages and
disadvantages are listed below. Study these factors carefully
before choosing the franchise option.

FRANCHISEE

Advantages Disadvantages

– established product – failed expectations
or service

– technical & managerial – service costs
assistance

– quality control – overdependence
standards

– less operating capital – restrictions on
freedom of
ownership

– opportunities for growth – termination of
– territorial franchisee agreement
right of subfranchisees

– operating franchisee – performance of
no rights other franchisees

FRANCHISOR

Advantages Disadvantages

– expansion – company-owned vs
– limited risk franchised units
– limited capital
– equity investment

– motivation – problems with
franchisee highly motivated recruitment

– operation of non-union business – communication

– bulk purchasing – freedom

– cooperative advertising

About author

SMB Reviews
SMB Reviews 473 posts

SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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