When you are thinking about buying a franchise, there are a lot of factors to consider before making a final choice. You need to know that you’re doing the right thing because it can be very expensive and you probably won’t be profitable on day one.
So, you’ll need to be able to keep going until profitability. If you do your due diligence before choosing a franchise, you’ll get there.
Personal Factors to Consider
* Skills – Do you have the skills to do the job you will need to do for your franchise choice? For example, a food or retail franchise will require you to spend an enormous amount of time on your feet.
* Desire – Do you really want to do "that"? Whatever it is. Every job has things to do that are not fun. Taxes, paperwork, data entry, stocking and so forth. Well, you may be the type who likes those things, but you know how it is. There are things you won’t like doing, but if you have a desire and passion for delivering the results of what your business delivers, you’ll do great.
* Time to profitability – How long can you hang on without making a profit while also paying all the bills associated with your new business franchise? How long can your family survive?
Family Matters to Consider
* Flexibility – If you have children, are their ages at the point where they can do without you for long periods of time? You may be putting in more than your average eight-hour day to get things done.
* Childcare – Can you afford and find some childcare that will be flexible enough to go with the flow as a business owner? If an alarm goes off at 3 am, will you be able to deal with it?
* Extended family – Do you have the support of your extended family, such that they would help if you needed anything for your family or help while you’re getting on your feet? Will they at the very least tell others about your business?
* Spouse/partner – When you start a business, it’s important to have your spouse on board. Even if you’re not doing it together, you will be using family resources and taking time from your family to get it done.
Financial Factors and Costs to Consider
* Accountant fees – Hire a CPA that has experience with franchising.
* Advertising and marketing fees – You may pay an additional fee to your franchisor for marketing, but you need to do more marketing than that.
* Business licenses – Everyone must have a business license; prices vary.
* Equipment – In some cases, some of your franchise fees will pay for some of the expenses, but some of it will not be prepared.
* Grand opening expenses – You may need to provide food and other things for the ribbon cutting.
* Insurance – Contact an insurance rep who specializes in your type of business.
* Landscaping – If you have lawn or plants, they need to be maintained.
* Legal fees – Always hire a lawyer prior to signing your contract.
* Maintenance – Toilets break, equipment breaks... you must fix it.
* Product costs – You may have to purchase from your franchisor, so you need to find out the costs of that.
* Rent – Even if you build out a place, unless you buy it, you’ll have ongoing rent responsibility.
* Royalties – Royalties are based on revenue, not profit. Therefore, you’ll also be responsible for sending that payment monthly to your franchisor.
* Salaries – You’ll have to pay your employees; remember this includes payroll tax.
* Signage – You may want to have signs on your window, an awning, or other signs for your business.
* Supplies – You may need to buy other supplies on your own for your business that you don’t buy or don’t have to buy from the franchisor if you can get them at a discount.
* Taxes – You’ll have to pay quarterly taxes, sales tax, payroll taxes and other taxes based on the type of business you have.
* The franchise fee – This is the fee you pay when you sign a contract. What it covers depends on the franchisor.
* Uniforms – If your franchise requires uniforms, that often includes uniforms for owners. You will need to supply at least one to your staff and one for yourself.
* Utilities – Everyone pays for the lights, including a franchisor.
* More – This list isn’t all-inclusive because it depends on which type of franchise you buy into and what they require.
The best thing you can do is make a spreadsheet of all the potential costs, do your research, and move forward with the confidence that you can succeed because you’ve done the research necessary to ensure success.