Some entrepreneurs look at purchasing a franchise as a safe bet. After all, you have a ready-made brand and clientele at your disposal, so it stands to reason that you might think success is assured. This is not the case, however. Franchisees face just as much risk as any other business owner, according to Forbes. The following are a few key factors to keep in mind before you make a substantial investment in a franchise.
Cost is extremely important, in this case. Franchise expenses often exceed the cost of buying the business and any necessary equipment to run it. There are also less-obvious costs you should consider when determining your budget. For example, you may need to spend money on marketing expenses, which can become quite exorbitant. Be prepared to barely break even or lose money during the first year. Make sure you have enough money to cover costs until your business is able to gain a lucrative foothold. If you don't think you'll be able to make it, it's best to invest elsewhere.
While financial issues are a practical concern, you should also take some time to consider whether your personality is a good fit for a franchise. If you fancy yourself an innovator, this opportunity might not be for you. Running a franchise is all about using a pre-established formula, one that has already proved successful in the past. Following the rules is key in this case, whether they pertain to recipes or processes.
Finally, don't be pressured into making a decision before you're ready. You may work with a franchise consultant, who will try hard to get you to agree to the terms. Keep in mind that these people usually receive a commission for franchises purchased, which means they have a vested interest in making a deal. Take your time to consider the offer, read through all pertinent documentation, and don't be rushed into an agreement you're not comfortable with.