Thinking about diving into the world of franchising?
Before you take the leap, it’s essential to ask yourself a series of pivotal questions. These questions will serve as your compass, guiding you toward the right franchise opportunity that aligns with your goals and aspirations.
In this blog, we will explore the nine crucial questions you need to affirmatively answer before embarking on your franchising journey. Whether you’re a seasoned entrepreneur or new to the business world, these inquiries will help you make informed decisions and set a solid foundation for your franchising success.
#1: Do You Have Enough Funds?
One of the first and most critical questions to address before considering any franchise opportunity is your financial readiness. Franchising requires a significant upfront investment, and it’s essential to have a clear understanding of your financial capabilities. This involves not only having enough funds to cover the initial franchise fee and startup costs but also having a financial buffer to sustain your business until it becomes profitable.
This is exactly why most franchise systems will list the minimum financial requirements needed to enter their system, typically in the form of minimum net worth and minimum liquidity.
Understanding where you stand financially is critical when it comes to elevating whether or not you are ready to take on the world of franchising.
Tips For Success:
- Calculate your current net worth to better understand which franchise opportunities you can afford.
- Understand how much liquid cash (cash on hand) you have ready to invest into an opportunity.
#2: Are You Willing To Follow A System?
One of the biggest advantages to joining a franchise system is the ability to rely on a proven business system. Franchise opportunities come with established processes, guidelines, and operational protocols designed to ensure consistency across all franchise locations.
If creating processes and systems from scratch sound interesting to you, you may find franchising to feel limiting and may perform better by starting your own concept. However, if you’re someone who likes following an existing system and see the value in doing so, you’re on the right track to potentially thriving in the world of franchising.
Tips For Success:
- Self awareness is huge! Identify your own personal preference between relying on an existing system or creating your own from scratch. If you feel creatively limited from following a system, then franchising may not be right for you.
#3: Do You Have A High Tolerance For Risk?
If you want the potential upside that franchising can offer, are you okay with the potential downside? This is where a careful evaluation of your risk tolerance comes into play.
The best way to assess this is by asking the question: “Am I okay with the potential worst case scenario that comes with this opportunity?”
In most cases, the worst case scenario of franchising is business failure. Certainly, you can lower your risk by educating yourself on an industry, evaluating the performance of other locations in a system, and more. However, at the end of the day, success is never guaranteed, which is why you must be comfortable with the worst case scenario outcome.
If you can accept the potential of this worst case scenario, then you are likely ready to explore franchise concepts as risk tolerance will no longer be an obstacle that would prevent you from pursing opportunities. However, if you prefer a lower-risk path, you may want to delay researching business opportunities until you have readjusted your personal risk tolerance.
Tips For Success:
- Assess your comfort with taking risks by asking if you’re okay with the possibility of business failure. If you can accept this worst-case scenario, you may be ready for franchise opportunities.
#4: Is Everyone In Your Network Onboard?
Before you decide to research franchise opportunities, it’s crucial to consider whether the people in your life, like your family and close friends, are supportive and onboard with your decision.
Starting and running a franchise can be demanding, both in terms of time and energy. Having the support of those close to you can make a significant difference in your ability to handle the challenges that may arise.
Make sure you communicate openly with them, involve them in the decision-making process, and ensure that everyone is comfortable and onboard with your franchising journey. Their support can be a valuable asset as you work towards building a successful franchise business.
Tips For Success:
- Ensure that your family and close friends are supportive and onboard with your decision to pursue franchise opportunities.
#5: Are You In It For The Long Haul?
When contemplating a franchise opportunity, it’s vital to ask yourself if you’re committed to the long-term journey.
The best way to assess this is by answering the question, “How long am I willing to work prior to hitting my defined goals?”
If your answer used time increments such as “days”, “weeks”, or “months”, you may have unrealistic expectations about franchise ownership. That’s because in most circumstances, success often doesn’t come overnight.
Rather, more often than not, longevity often leads to long term success. It allows you to reap the rewards of your hard work and investment over time. This typically means steady progress year after year.
If you’re not ready for a long-term commitment that lasts years into the future, franchising may not be the best fit for you.
Tips For Success:
- Success in franchising often takes years of dedication, so be prepared for a long-term commitment if you choose this path.
#6: Do You Bring Leadership Experience To The Table?
In most circumstances, a franchise concept will require you to build a team. This is because most businesses cannot operate in isolation without people aiding in the process.
Therefore, existing leadership experience can give you a significant advantage in managing and growing your operation. Your ability to lead, inspire, and make sound decisions can contribute to the long-term success of your business.
In order to best assess your leadership ability you should ask yourself the following questions:
- How do you identify the line between when a team member needs more resources vs when they need to be let go due to underperformance?
- How do I motivate a team to reach a collective goal?
- What areas of leadership do you believe you need to improve?
- What is the key to successfully navigating conflict?
If you don’t feel certain in your answers to these questions, then you may need to reevaluate and grow in your current leadership abilities prior to researching franchise opportunities.
Tips For Success:
- Evaluate your leadership abilities by asking critical questions about team management, motivation, areas for improvement, and conflict resolution.
#7: Can You View Expenses As Assets Rather Than Liabilities?
In almost every scenario, opening a franchise costs more than opening your own business. Why?
Generally it’s because most franchise systems don’t see expenses as liabilities. They see them as assets in order to produce more revenue.
Several examples include:
- Paying a higher rental rate in a highly visible location in order to increase walk in traffic for a retail storefront.
- Paying for more expensive computers that have faster processing power so employees can be more efficient.
Therefore, your perspective on expenses need to align with that of the franchising world. While it’s always important to be mindful of your expenses and strategically reduce them whenever possible, if your philosophy is to always find the cheapest option out there, you may not be ready to invest in a franchise opportunity.
Tips For Success:
- Shift your perspective on expenses from viewing them as liabilities to recognizing them as potential assets that can generate more revenue or enhance efficiency.
#8: Do You Regularly Invest In Your Own Personal Growth?
The reality is that franchising can be both very rewarding and challenging. There will be times that it pushes you to the brink and it’s during those moments you get to decide how you respond.
This is exactly why you should be constantly seeking personal growth well before you consider jumping into any franchise opportunity.
Whether it’s expanding your knowledge, honing leadership skills, or staying updated on industry trends, ongoing personal growth can significantly benefit your franchise venture. It not only equips you to navigate challenges but also allows you to adapt and thrive in a constantly evolving business landscape.
By prioritizing your personal growth, you position yourself to make informed decisions, foster innovation, and lead your franchise to greater heights.
Tips For Success:
- Continuously prioritize personal growth to prepare for the challenges that are inevitable with franchising. “Your work, works on you, more than you work on it. – Alex Hormozi”
#9: Can You Solve Problems On Your Own?
A good franchisor will step in and help a struggling franchisee that is not meeting financial projections. But what about support surrounding smaller items?
As a point of reference, the following are different types of potential challenges you may face that are typically the full responsibility of a franchisee:
- Not receiving applications for a job posting.
- A third party software isn’t working correctly.
- Your employees are showing up late for work.
While seeking guidance and support from your franchisor is valuable, the capacity to analyze problems, make informed decisions, and implement effective solutions can greatly contribute to your success as a franchisee.
It’s essential to reflect on your ability to independently tackle issues that may arise within your business. Being resourceful and adaptable in the face of adversity is key, as it allows you to navigate hurdles confidently and keep your franchise on a path toward growth and prosperity.
Tips For Success:
- Evaluate your ability to independently address and resolve challenges. Are you resourceful?
The Bottom Line
Embarking on a journey into the world of franchising demands a blend of qualities and readiness. Beyond financial considerations, you must assess your current leadership skills, your desire for personal growth, and ability to solve problem with limited support.
While franchisors provide valuable support, your own resilience, adaptability, and capacity to overcome challenges independently play a vital role in achieving long-term success. As you contemplate franchise opportunities, remember that the journey may be demanding, but it’s also an opportunity for growth and fulfillment, where each obstacle conquered brings you closer to the realization of your dreams as a successful franchisee.
If you feel like you can confidently claim that you have all 9 of these attributes and have evidence to back them up, then we’d love to invite you to schedule an introductory call with our team to see if navigating a potential partnership together makes sense.
