Franchising 101; Dos and Don’ts of Becoming a Successful Entrepreneur

Becoming a Successful Entrepreneur

If you are considering trying your hand at entrepreneurship, you may have come across the concept of franchising.

Franchising is a business strategy where you can become a business owner without having to start everything from scratch.

Instead of coming up with your own business idea, what you do is essentially purchasing the rights to use an already existing brand.

At first glance, a deal like this may seem too good to be true. Indeed, the matter is a bit more complicated than this.

However, depending on your goals, strengths, and preferences, franchising can be a fantastic way to break into the business world.

In case you are on the fence about whether this is for you, here are the main advantages and disadvantages of franchising and the dos and don’ts if you want to be a successful franchisee.

Advantages and disadvantages of franchising

Franchising may seem like a shortcut to business ownership in some way. The fact that you can skip the product development and branding phase makes this business endeavor much faster to get in motion.

The business model is already tried and tested, in addition, you will have little to worry about getting your name out there if you purchase a well-known franchise.

People already know you and loyal customers will have no doubts about the quality of service. Building such a brand presence and gaining the trust of customers would otherwise be a long process during which many new businesses struggle and eventually fail.

Another major advantage of franchising is that you’re not doing it alone. Your franchisor will equip you with everything you need, ideally offer training and education, and have control over critical decisions so the risks are greatly mitigated.

All in all, you can expect effective management and a great support system. However, some people may consider the same things as disadvantages.

You have to remember that when you purchase a franchise, you are merely buying rights. With those rights come obligations. Each franchise has its own rules which franchisees must follow.

Franchisees don’t get to make certain decisions on their own, which may feel limiting to those people who want to do business their own way.

Despite being your own boss, there will always be a corporation above you, and while this mitigates risks, it also limits freedom.

Your franchisor will have insight into your finances, and may also have restrictions regarding where you will operate and who your suppliers will be.

There are financial considerations to make as well. The significance of these disadvantages mainly depends on your priorities.

Dos and Don’ts of becoming a successful franchisee

Even while knowing the advantages and disadvantages, there are a number of things to consider and pitfalls to avoid if you have decided to look into franchises. Here are some of the dos and don’ts of becoming a successful franchisee.

DO: Consider whether this is for you

As we just mentioned, the full significance of the advantages and disadvantages of franchising is quite subjective.

So, the first important thing you should do before you begin this endeavor is evaluating whether you are the right person for this kind of work.

Franchising is by no means a side hustle, so you need to be ready to commit yourself fully. Needless to say, this is not the place to realize your own ideas.

Are you ready to give up your creative freedom for a lower chance of failure? On the other hand, if you lack an idea but think of yourself as someone who is great at business, then this might be the perfect arrangement for you. Even if you lack experience but are motivated to take on a new challenge, franchising may be the way to go.

DON’T: Underestimate the expenses

Earlier, we briefly mentioned that there are certain financial considerations that you need to make before purchasing a franchise.

Naturally, the costs of the purchase are considerable themselves, especially if we are talking about a well-known franchise, so you mustn’t underestimate the expenses and consider how you will fund it carefully.

It may be easier to get approved for a loan in the case of a franchise since your franchisor will be well-prepared with a solid business plan to present.

Still, you shouldn’t rush into it. Franchising also comes with ongoing fees most of the time, and you need to calculate these into your financial plans. A certain percentage of your profits will always go to your franchisor in the name of royalties.

DO: Research everything well

Perhaps the most important piece of advice you should stick to is doing your homework religiously.

Before you purchase a franchise, there is a large amount of research that cannot be skipped, not only about franchising in general but about the franchise in question, too.

Do a background check: how has the franchise been doing financially? Look into its background and see the company’s litigation history.

The most important piece of document here will be the franchise disclosure document (FDD). Pay special attention to restrictions, protected territory, as well as renewal rights.

The FDD should also disclose who the other franchisees within the franchise are. It would be a good idea to personally contact them for first-hand information about their experiences.

DON’T: Expect it to be easy

Just because franchising has its perks, it doesn’t mean that you will be able to just sit back and check on your business once in a while.

While the support of your franchisor and their tried-and-tested system may make things considerably easier than if you were to develop your business model now, through trial and error, franchising is by no means easy.

Don’t assume that success will come without putting in the effort. Franchisees have long working hours, so you will need to be passionate about this job.

However, the benefit is that you have some flexibility regarding your working hours, so work on your time-management skills and you will be able to maintain a work-life balance.

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Nothing in the world is perfect, so naturally, franchising has its drawbacks, too. However, if your goals align with this form of business, then disadvantages can become advantages. Stick to the dos and don’ts and you will be able to make the most of this endeavor.