Investing in a franchise could be an amazing opportunity. Since the brand and business procedures are already established, in theory, you’re buying into a successful business with all the groundwork already done for you.
However, in order to make your investment in a franchise the right move for you, you have to know how to evaluate your options and make the right decision. This is especially true if you’re investing in one of the top 10 franchises, which are more established but also more expensive. The larger the investment, the more pressure there is beforehand to evaluate your options.
Here are 5 ways to evaluate a franchise to make sure it’s the best one for you to own.
Before you even start thinking about which franchise you own, the first evaluation you need to do is on yourself.
Figuring out your own skills and priorities is a step that many investors forget. Before they know it, they’re already making cash investments in a franchise that they may not be prepared to own. It’s the first essential step because it decides not only what you’re capable of owning but what kind of franchise should be your priority to evaluate in the first place.
If you look up the best franchises to open, you’re going to find all the usual suspects: McDonald’s, UPS, 7-Eleven, and so on. These are the places that will be a good investment pretty much no matter where they spring up.
Yet, it’s important to realize that just because these are the top franchises to own on paper, doesn’t mean that they’re the top franchises for you or in your location.
If you’re not a people person at all, you may not be able to handle training employees for a restaurant setting, for instance. If you’re not very good with numbers and codes, then a mailing service franchise is probably not the best franchise to own for you.
Whether you’re considering investing in a BBQ restaurant chain or a salon, you must evaluate yourself first to determine if your goals and aptitudes will be a match for your investment.
Look at the Fees
When you’re evaluating the best franchises to own, the franchise fees are a huge part of your research. This is the money that you must pay to buy the license to own this franchise and all the materials that they’ve made specifically for their company that dictate how it should be run.
This is money that’s additional to the cost of the actual land and business, by the way. It’s the cost of the agreement between you and your franchise and it’s seriously worth evaluating.
Firstly, how much is it? Those top 10 franchises can run up to $1,000,000 just for the franchise fee depending on where they are (the average is around $35,000).
Next, you need to think about what you’re getting when you sign the franchising agreement, not only the benefits but the responsibilities as well. When you sign, you’ll be getting a contract to follow, an operations manual to be responsible for, and basically everything that makes this brand run the way it’s supposed to.
When you’re looking for a franchise to invest in, you need to ask how their infrastructure works. What is their marketing structure, employee training procedure, and business model? These are all things that you’ll be responsible for if you decide to own the franchise. You want to make sure beforehand that you’re a good fit for them.
Consider the Market
Any savvy investor knows the importance of location. How the franchise you’re considering fits into its local market will make a huge impact on how valuable the investment ends up being.
For example, McDonald’s may be one of the best franchises to own normally, but what if you’re looking in an area that’s already flush with fast-food and burger joints? A wiser investment may be in a BBQ business or something more notable.
When you’re evaluating a franchise to own, you’re not just looking at the quality of the business itself, but the quality of the business in your immediate market. To make the wisest investment possible, you need to consider how even the value of the top franchises can change.
Hire a Franchise Consultant
Hiring a franchise consultant is a way to evaluate a franchise as a potential investment opportunity without doing so much of the heavy lifting yourself. These are people whose entire job is finding a franchise for you to invest in that matches your skills and needs.
Many of them offer free consultations to find you the right investment opportunities. Just realize that they work on the promise of receiving a very large commission when their consultation pans out for you.
Call the Franchise
This may seem obvious, but you’d be surprised how many investors forget this crucial step. Calling the franchise itself or going to their website to get information can be a great way to figure out if they’re the right fit for you.
Figure out the exact questions you want to ask them before you make the call so that you’re prepared to get the information that’s crucial to making your decision. You want to know how long they’ve been around, how often their franchises fail, and what their future looks like.
Looking for the best franchise to own can be a hassle. With all the costs associated with making an investment in a franchise, it’s even more important that you have a game plan that includes the right steps.
Many people forget to evaluate themselves first to figure out what kind of business they would be a good fit for. Simple things like making calls to the individual franchises can be great sources of information that investors should use to their advantage.
The more information you have, the better your decision will be. Before you make a big investment, use these tips to first evaluate the franchise you want to own. Ensure not only that you’re a good fit for its business, but that its business is a good fit for you.