You want to start and run your own business. As you’ve explored your options, you’re beginning to consider franchise investments. That could be a good move if you start by doing your investment due diligence.
Here are some key questions you need to answer first.
Is Financing a Franchise the Right Move for Me?
Start with a definition. A franchise is a business model in which the investor purchases the company name and brand identity, sells only the products or services offered by the franchisor, and operates the business in a manner that’s been established and refined to maximize profit potential.
A successful franchise is one that’s known and respected by as wide a range of customers as possible. As the franchisee, you should be a known commodity from the moment you hang your sign on the door. Think of such franchises as Hilton Hotels, McDonald’s, Freeway Insurance, Great Clips, and Cold Stone Creamery, among countless others. They’re all recognized, respected, and have a built-in customer base.
The franchise model might be especially attractive to anyone who’s a first-time business owner. That’s because the way of doing business has already been established and formalized. You’ll be extensively trained and learn how to operate your business with methods that have passed endless tests. Furthermore, you should be able to consult with your franchisor anytime you run into problems or challenges.
Keep in mind, even with all the training and guidance, the business is yours. Bottom line: You’re the boss.
Are There Any Investment Risks to Being a Franchise Owner?
Of course, just as there are risks to any form of business ownership. In the first place, the costs of investing in a franchise are incredibly variable. So, how much does a franchise cost? They can range from a few thousand dollars to several million. Think of the difference in what you’d expect to pay for a franchise senior care company operated by you alone and a downtown city hotel with a staff in the hundreds.
It’s also true that one of the key advantages of investing in a franchise can actually be a drawback to some. While the business model involves conducting your business in ways that have succeeded for the franchisor and other franchisees, this can prove to be too restrictive for some entrepreneurs. You’re replicating a proven operation model, not creating an entirely new way of operating a company. Can you work — and thrive — within an established framework? If not, this model might not be right for you.
How Do I Choose a Franchise?
Carefully. After all, this might be the largest ticket item you’ll ever purchase, and it will be your career–at least for the immediate future. And there are countless different types of franchises to consider. Here are the steps you should take.
Shop Responsibly
If you choose a franchisor just because it’s available, but you have no fundamental understanding or interest in it, you’ll hate your life — or at least the part of it spent at work (and that could be a lot). So, make sure your new business matches your instincts, interests, and capabilities.
Go online. Make a search engine query such as “fast food franchises in California,” or “insurance company franchises.” You should find plenty of websites promoting franchise investment opportunities.
Make Contact
When something interests you, reach out. You’ll find contact information for a representative online. Initiate a conversation. The first question you should ask is the cost of purchasing and operating the franchise. Don’t waste time if the opportunity is beyond your means.
Dig Deeper
If you’re still serious about the opportunity at this point, do your investment due diligence. This involves finding out about all the costs and responsibilities associated with becoming a franchisee. Your initial fee gets you in the door. You’ll also have to agree to pay royalties on the products or services you’ll offer. This might be an upfront, monthly, or quarterly payment based on gross sales or a percentage of profits — the details are highly variable. That’s why it’s part of your investment due diligence to find out exactly what’s expected, when, and how.
Explore Funding
Where will the capital come from for purchasing a franchise and running the operation? Can you use your savings? Will family and friends consider partnership investing? Can you get a bank loan? Do you have connections to deeper-pocketed investors who might be interested in joining your venture?
Another advantage of purchasing a franchise rather than starting your business from the ground floor is that your investors or partners might already know about the operation. They can do their own due diligence based on actual results rather than potential. That is, the franchisor already has a successful enterprise and perhaps hundreds or even thousands of franchisees on record who are already succeeding. This impressive track record might make your money people more inclined to get involved.
(Carefully) Read Your FDD
All franchisors must provide prospective franchisees a Franchise Disclosure Document, or FDD. This should list all the conditions, restrictions, and other details of owning a franchise.
Read it carefully, then let your advisors do the same. If you object to any point, try to get it changed. If your franchisor won’t negotiate, consider walking away. You don’t want to have reservations even after you’ve committed financially.
If you feel good about your FDD, get ready for a long and profitable relationship with the franchise operation that’s right for you.
Now Consider Freeway Insurance
Should I invest in a franchise?
While you’re considering franchise investments, we hope you’ll consider us. At Freeway, we can show you our proven track record for franchisee success. We help our entrepreneurs succeed with top-tier training, ongoing support when you need it, and strong brand recognition. Your upfront and startup costs will be low. We’ll even help you obtain the certifications you’ll need for wherever you operate your business.
You and your policyholders will gain access to a deep inventory of name-brand insurance products that will spur sales.
Joining one of the nation’s largest and most respected personal lines insurance companies will get you instant name recognition and a strong competitive edge.
Call your Freeway Insurance representative today at (877) 822-3024.
Let’s discuss your business success on your own terms.
