5 Questions to Ask Yourself before Investing in a Franchise
While a growing number of people aim to one day own their own business, getting started can be a complex process, and taking the first step can be daunting. Franchising is an attractive alternative for those interested in the freedom of running their own business with the support and infrastructure of an established brand already in place.
Franchising may be a great fit for many aspiring entrepreneurs, but these days there are seemingly endless concepts and brands to choose from. Each one has a different business model requiring various levels of commitment in time, resources and capital. What may be a great fit for one person may not work for another. So, it’s important to carefully consider both the business opportunity and your motivations before entering a partnership with a franchisor to ensure it will benefit both parties.
Before investing in a franchise, consider the below questions to help determine whether a particular brand is the right one for you:
- Am I passionate about this brand?
A franchise is not guaranteed to turn an individual into an overnight success without the franchisee’s enthusiasm for the brand and drive to be involved every step of the way. It’s much easier for franchisees to stay committed and motivated to put in the work if they love what they do. In the beginning, it will likely take franchisees some time before a profit starts rolling in, and a passion for the work will help them consistently put in the hours until the business gains momentum.
Franchisees of Winmark brands such as Plato’s Closet or Play It Again Sports, for example, typically start out as customers who value saving money and love the business concept. Their appreciation for the resale industry makes them ideal candidates for starting their own franchise in their local community, because their ideals align with the company’s mission, and that passion helps fuel their growth.
- What are my reasons for pursuing the opportunity?
Similar to establishing passion for a brand before committing to it, it is important for potential franchisees to determine what gives them purpose, and what role the franchise will play in helping them achieve that. For some, that may mean using their business as a vehicle to make a difference in their community. For others, it means growing their business to create more opportunities for employment, or a better life for their families.
- Is there demand in my market?
Passion for a brand and a hunger for success are great starting points when considering a franchise, but market demand in the area you’re looking to establish your business is a key consideration, as well. Without demand in the market, a franchise will likely struggle no matter how solid the business model or dedicated the franchisee.
Before committing to a particular franchise, be sure to conduct adequate market research. While it may seem counterproductive to enter a market with a high volume of competing concepts, keep in mind this can be a great indicator of high demand for the product or service. Other factors to consider include looking at franchise growth in a particular area, as well as the size and number of competing brands.
- What are my personal goals?
Just as passion for a brand is important to ensure consistent motivation and dedication to growing your business, it is also important to identify the individual drivers behind wanting to become an entrepreneur. Some people may be in it for the profit, while schedule flexibility may be a bigger priority for others.
Franchise concepts are all structured differently, with some requiring more commitment from its franchisees than others. Identifying your personal goals will help determine whether or not a specific brand is a good fit and will get you closer to achieving those goals.
- What are my financial goals?
Some franchisees are looking to grow their portfolio and expand their business, while others may have come out of retirement to pursue a passion that affords them flexibility. Perhaps more importantly, be sure to determine whether or not you can afford the initial investment and have sufficient capital to support yourself, your family and business during the time it takes before your business begins turning a profit.
Also be sure to consider meeting with existing franchisees and ask them specific questions to help determine if the franchise opportunity is set up to help you meet your financial goals.
Investing in a franchise can be a phenomenal way to get into business, but it is important to commit to a business model and organization that will best meet your needs on both a personal and professional level. It’s critical that it aligns with both your passions and capabilities, to give yourself the best change of long-term success and fulfillment.
For more information about investment opportunities with Winmark Corporation’s resale franchises, click here.