Owning a franchise has a variety of advantages and disadvantages. Advantages include name recognition of one's brand and a proven system (or template) in which to run it. Contrastingly, owning a franchise offers little flexibility to those who want to own a business, which is one the attractive features to entrepreneurship.
When people do consider buying into a franchise, or becoming a franchisee, three things should be done without question:
- Ensure the brand easily recognized
- Interview many store owners
- Ask if it's worth it as opposed to starting a new brand
Does the Franchise Have Brand Recognition?
It might not sound like it is important, but national recognition is very important when buying into a franchise. It is the reason people passing through from out of town will stop for a bite to eat.
One regional franchise that has national appeal is Sonic Drive-in, a hamburger stand with tater tots and flavored sweet tea worth traveling for. Sonic typically operates in the southern United States in such cities as Austin, Texas, but they have national commercials, leading New Yorkers to want to try their products, leaving them in wait making Sonic a superior choice in terms of brand recognition below McDonald's, Burger King, and Wendy's.
Once brand recognition is established, it is time to interview active franchisees.
Interview Many Franchisees Before Investing
A smart franchiser will have a ready list of franchisees that should be visited to see if the opportunity is worthwhile. This is a good place to start, but not the only place.
Seeking out franchisees not on the list will allow interested investors to speak with people operating at a loss, those who don't get along with the franchiser, and others who will have advice that only they can pass on from unique experiences.
Dave Ramsey, radio and television host of The Dave Ramsey Show, advises those looking to get into a franchise to interview 40 franchisees before getting into one.
Ask if Buying Into Someone Else's System is Worth it
Some franchises are great, but others are simple enough that buying into an expensive system in the neighborhood of tens of thousands of dollars (or more) may not be worth it.
One great franchise in terms of brand recognition is Smoothie King. They have a great product that is mouth watering. Buying into this system, though, will require a $25,000 franchise fee, and the initial investment for this business, according franchisemall.com, can cost up to $300,000!
One must ask, while Smoothie King is a very likely success, is it worth it to pay so much money to learn how to make a fruit and milk shake? For some it is, and the money that will be made in running such a business may pay handsomely over many years.
Related Article:
Advantages of Buying Into a Franchise
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