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The beginner’s guide to starting a franchise business
So you have extra money at hand, and you don’t know where to put it. Buying a franchise can be one of the most viable options for you. Many of these franchise businesses have tried-and-tested business models that can help you generate more income and achieve your goals.
While buying a franchise may seem easy with all the businesses available for your choosing, it also comes with risks.
Here are 7 things to remember when buying a franchise:
1. Pick your interest
Like starting any other business, choose a franchise according to your interest. Do you love sisig? Do you eat and breathe fish balls? Is isaw the love of your life? When you choose something you’re passionate about, the drive to succeed is stronger. You don’t want to invest your money in a business you’d get too sated with later on.
For those looking for franchising options, BPI Ka-Negosyo offers a franchise finder tool that helps you match your interests from a list of pre-screened franchises by BPI. You can even start a franchise with a collateral-free loan when choosing from BPI’s Best List Franchise Brands.
2. Research meticulously
Someone can present you a great business model with charts upon charts of potential income, but there may be some skeletons in the closet they wouldn’t disclose upfront – a possible lawsuit, a health concern, or a financial loss. Once you’ve decided a buko juice stand is your passion, it’s time to do your research. How long has the company been in business? Has the company faced any problems that could affect you? Buying a franchise can be just as risky as starting your very own. It’s your hard-earned money; you need to do your due diligence.
3. Get in touch with the franchisor
After doing your research and finally choosing a business to franchise, get in touch with the franchisor and ask questions. What is the business’s success rate? What happens when you run out of supplies? How many franchises have closed shop? Don’t be shy about the questions you ask. The more you know, the more confident you’ll feel in getting into business with them.
4. Get to know the cost
Many franchising ads showcase the cheapest fees possible, but this doesn’t mean you should easily take the bait. If it sounds too good to be true, then it probably is. What could be the catch? Figure out how much the initial franchise and royalty fees are. Ask about the additional costs for employee compensation and marketing materials. Costs in buying a franchise will be recurring, so you need to make sure you have the finances ready to sustain this business
5. Read the franchise agreement carefully
The franchise agreement presents the duties, responsibilities and rights of the franchisee and the franchisor. In it, you will read the agreement period, renewal concerns, and contract termination. This isn’t like the user agreements you click “Yes, I have read the agreement” without actually reading. As you go through the franchise agreement, don’t hesitate to ask questions, especially when there are terms you don’t understand. Should you feel the need to consult a lawyer, feel free to do so. While it may incur additional costs, it’s better to be safe than start on the losing end of a deal.
6. Get placed well
Location is one of the key aspects to a business. While some franchisors may have possible locations ready, choose a place that is accessible for you and your targeted customers. On your free time, get to know the area. Is it safe? Who passes by? When does the area get busy? Who are your competitors? Getting familiar with the location will help you gauge if this business will be profitable.
7. Ask: Is it worth it?
The franchise business may be appealing at the moment, but will this business last in the long run? To help you determine if buying a particular franchise is worth it, you can come up with a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. Will the costs impede you from growth? Will the possible challenges hinder you from your personal and entrepreneurial goals? If the outlook seems feasible, then by all means pursue the goal.
Buying a franchise can be an exhilarating start to entrepreneurship. It will help you generate income and allow you to develop your business skills. If you have the guts, the funds, and the passion to get into buying a franchise, then go full steam ahead. Just be sure to do your part and research.