Three Important Aspects of Evaluating a Franchise
If you are an entrepreneur and you are looking to buy a franchise, then you have made a good decision. A franchise offers many great advantages to someone wanting to start a business. However, you need to take your time to evaluate a franchise. Some franchise opportunities are better than others. The following three things to look at with any franchise.
What is the return on investment?
This is a number expressed in time. Specifically, how long will it take you to get back your original investment. A good return on investment for a franchise is usually in the range of three to five years. This figure is important because the amount of money you will need to buy a franchise can vary greatly. However, the franchises with small price tags are not always a good investment if it takes many years to get your money. Conversely, an opportunity with a large initial investment may be better because it is earned back quickly, if the franchise is popular with consumers and a proven business with a low risk of failure.
What is the market?
Sometimes a hot new franchise is growing quickly, but the company has never done enough research to identify exactly who they are marketing to. Who exactly is their customer base? You don’t want to buy a franchise unless you know exactly who your customers are. Businesses come and go, and this includes franchises as well. You don’t want to buy a franchise today only to find out tomorrow that they were just a fad. Know the customer base today, then look at what the possibilities are for expanding that customer base. A franchise company that knows their market will also be able to explain their ideas on expanding their customer base.
What type of training and support do they offer?
Having a background in the business of the franchise you are buying is helpful, but some of what you will need to know will specifically be taught by the company. You need to know exactly what training they give you prior to opening the franchise. You also need to know how much support you will receive. Is there someone who you can contact for information and assistance? Support for sales is also a big issue. Do they run any national or regional advertising campaigns? Without strong advertising, a franchise agreement is often not worth your time.
The three factors listed above are just the beginning of evaluating a franchise. Take your time and speak to current and former franchise owners if possible.